The division manager of Division B received the following operating income data for the past year:The manager of the division is surprised that the T205 product line is not profitable. The division accountant estimates that dropping the T205 product line will decrease fixed cost of goods sold by $75,000 and decrease fixed selling and administrative expenses by $10,000.Prepare a differential analysis to show whether Division B should drop the T205 product line.What is your recommendation to the manager of Division B? DIVISION B OF DILLARD, INC.Income StatementFor the Year Ended December 31, 2018Product LineB179TotalT205$ 310,000Net Sales Revenue$ 360,000$ 670,000Cost of Goods Sold:Variable31,00044,00075,000Fixed275,00067,000342,000Total Cost of Goods Sold306,000111,000417,000Gross Profit4,000249,000253,000Selling and Administrative Expenses:Variable68,00080,000148,000Fixed47,00027,00074,000Total Selling and Administrative Expenses115,000107,000222,000Operating Income (Loss)$ (111,000)$ 142,000$ 31,000

Keeping or dropping a segment in a firm or a division is a part of management accounting. Management…

Answered: DIVISION B OF DILLARD, INC. Income…

Intermediate Accounting: Reporting And Analysis

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Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter7: Inventories: Cost Measurement And Flow Assumptions

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Problem 2RE: On January 1, Pope Enterprises inventory was 625,000. Pope made 950,000 of net purchases during the...

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The division manager of Division B received the following operating income data for the past year:

The manager of the division is surprised that the T205 product line is not profitable. The division accountant estimates that dropping the T205 product line will decrease fixed cost of goods sold by $75,000 and decrease fixed selling and administrative expenses by $10,000.

Prepare a differential analysis to show whether Division B should drop the T205 product line.
What is your recommendation to the manager of Division B?

DIVISION B OF DILLARD, INC.
Income Statement
For the Year Ended December 31, 2018
Product Line
B179
Total
T205
$ 310,000
Net Sales Revenue
$ 360,000
$ 670,000
Cost of Goods Sold:
Variable
31,000
44,000
75,000
Fixed
275,000
67,000
342,000
Total Cost of Goods Sold
306,000
111,000
417,000
Gross Profit
4,000
249,000
253,000
Selling and Administrative Expenses:
Variable
68,000
80,000
148,000
Fixed
47,000
27,000
74,000
Total Selling and Administrative Expenses
115,000
107,000
222,000
Operating Income (Loss)
$ (111,000)
$ 142,000
$ 31,000

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