Problem 20-5A (Part Level Submission) Brislin Company has four operating divisio

Question

Problem 20-5A (Part Level Submission)

Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $211,100 and the following divisional results.

Analysis reveals the following percentages of variable costs in each division.

Discontinuance of any division would save 50% of the fixed costs and expenses for that division.

Top management is very concerned about the unprofitable divisions (I and II). Consensus is that one or both of the divisions should be discontinued.

Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. Division II’s unavoidable fixed costs are allocated equally to the continuing divisions. (Round answers to 0 decimal places, e.g. 1525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Division I II III IV Sales $246,000 $195,000 $498,000 $452,000 Cost of goods sold 198,000 192,000 304,000 247,000 Selling and administrative expenses 76,900 55,000 56,000 51,000 Income (loss) from operations $ (28,900) $ (52,000) $138,000 $154,000

Explanation / Answer

Solution:

Brislin company

CVP Income statement

For the quarter ended March 31, 2017

Variable cost:

Fixed costs:

Particulars Division- I ($) Division- III ($) Division- IV ($) Sales 246,000 498,000 452,000

Variable cost:

Cost of goods sold 144,540 234,080 195,130 Selling and administrative 31,529 26,880 31,620 Total Variable cost 176,069 260,960 226,750 Contribution 69,931 237,040 225,250

Fixed costs:

Cost of goods sold 53,460 69,920 51,870 Selling and administrative 45,371 29,120 19,380 Total Fixed cost 98,831 99,040 71,250 Income(loss) from operations (28,900) 138,000 154,000

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