********need the answer in excel format Consider the following information regar
ID: 2579175 • Letter: #
Question
********need the answer in excel format
Consider the following information regarding Wayne Manufacturing Company and the following instructions. This is similar to Problems 20-5A and 20-5B in our textbook. Wayne Manufacturing Company has four operating divisions. During the first quarter of 2016, the company reported the divisional results shown below and aggregate income shown below Aggregate Income Division North South East West Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations 561,000429,00031,000198,000 165,000 77,000 275,000 88,000 66,000 297,000 71,500 27,500) S 330,000 66,000 165,000 $ 44,000 $159,500 Analysis reveals the following percentages of variable costs in each division. Division: North South East West Cost of goods sold Selling and administrative expenses 70% 40% 80% 50% 75% 65% 90% 70% 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 (East and West). Consensus is that one or both of the divisions should be discontinued. Instructions-Your solutions should be clearly labeled on Solutions of this workbook. (a) Compute the contribution margin for the East and West Divisions. (See illustration 20-17 for guidance, if needed.) (b) Prepare an incremental analysis concerning the possible discontinuance of (1) East Division and (2) West Division. What course of action do you recommend for each division? Should either be closed? (See illustration 20-18 for guidance, if needed.) (c) Prepare a columnar condensed income statement for Wayne Manufacturing, assuming the division(s) that should be eliminated are eliminated. Use the CVP format. Remember: Closed division's unavoidable fixed costs are allocated equally to the continuing divisions. (See lilustrations 20-16 and 20-17 for guidance, if needed.) Problem & Instructions Solutions Sheet3 + eadyExplanation / Answer
WORKING NOTES
Calculations of variable costs, avoidable fixed costs
(a)
2)
The WEST division should be discontinued only. This is because the East division is providing a positive contribution margin as well as a positive operating income even after charging the traceable fixed expenses against the contribution. The West division, however, fails to recover the variable expenses and should be discontinued. The detailed analysis of the profitability of these two divisions have also been shown below:
3)
North South East West Cost of Selling & Cost of Selling & Cost of Selling & Cost of Selling & goods Admin. goods Admin. goods Admin. goods Admin. sold Expenses sold Expenses sold Expenses sold Expenses Total Cost $ 3,30,000 $ 66,000 $ 2,75,000 $ 88,000 $ 2,97,000 $ 71,500 $ 1,65,000 $ 77,000 Variable cost $ 2,47,500 $ 26,400 $ 2,20,000 $ 44,000 $ 2,22,750 $ 46,475 $ 1,48,500 $ 53,900 Fixed costs $ 82,500 $ 39,600 $ 55,000 $ 44,000 $ 74,250 $ 25,025 $ 16,500 $ 23,100 Traceable Fixed costs (50%) $ 41,250 $ 19,800 $ 27,500 $ 22,000 $ 37,125 $ 12,513 $ 8,250 $ 11,550
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