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Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $213,000 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.
Instructions
(a) Compute the contribution margin for Divisions I and II.
(b) Prepare an incremental analysis concerning the possible discontinuance of (1) Division 1 and (2) Division II. What course of action do you recommend for each division?
(c) Prepare a columnar condensed income statement for Brislin Company, assuming Division II is eliminated. (Use the CVP format.) Division II’s unavoidable fixed costs are allocated equally to the continuing divisions.
(d) Reconcile the total income from operations ($213,000) with the total income from operations without Division II.
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Chapter 7 Solutions
Managerial Accounting: Tools for Business Decision Making 7e Binder Ready Version + WileyPLUS Registration Card
- Crane, Inc. has three divisions: Bud, Wise, and Er. The results of operations for May, 2022 are presented below. Units sold Revenue Less variable costs Less direct fixed costs Less allocated fixed costs Net income Bud 2,700 $63,000 28,800 12,600 5,400 $16,200 Wise 4,500 $45,000 23,400 17,100 9,000 $(4,500) Er 1,800 $36,000 14,400 10,800 3,600 $7,200 Total 9,000 $144,000 66,600 40,500 18,000 $18,900 All of the allocated costs will continue even if a division is discontinued. Crane allocates indirect fixed costs based on the number of units to be sold. Since the Wise division has a net loss, Crane is concerned that it should be discontinued. Crane thinks that if the division is closed, that sales at the Bud division will increase by 12% while sales at the Er division will stay the same.arrow_forwardWingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 1,600,000 700,400 899,600 990,000 $ (90,400) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Sales Variable expenses as a percentage of sales. Traceable fixed expenses East $ 440,000 $ 280,000 52% Division Central $ 620,000 $ 320,000 36% West $ 540,000 46% $ 195,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $21,000 based on the belief that it would increase that division's sales by 15%. Assuming these estimates are accurate, how much…arrow_forwardWingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $ 1,610,000 Variable expenses 659,000 Contribution margin 951,000 Fixed expenses 1,046,000 Net operating income (loss) $ (95,000) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East Central West Sales $ 430,000 $ 610,000 $ 570,000 Variable expenses as a percentage of sales 52 % 34 % 40 % Traceable fixed expenses $ 288,000 $ 321,000 $ 193,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $29,000 based on the belief that it would…arrow_forward
- Req 1 Req 2A Req 2B Prepare a contributlon format Income statement segmented by dlvislons. Division Total Company East Central West Req 1 Req 2A Req 2B The Marketing Department has proposed increasing the West Division's monthly advertising by $22,000 based on the belief that it would increase that division's sales by 13%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? (Do not round intermediate calculations.) Net operating income will by Req 1 Req 2A Req 2B Would you recommend the increased advertising? OYes Noarrow_forwardWingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format Income statement: sales variable expenses Contribution margin Fixed expenses $ 1,610,000 551,400 Net operating income (loss) 1,058,600 1,164,000 $ (105,400) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following Information: Sales East $410,000 Division Central $ 670,000 West $530,000 Variable expenses as a percentage of sales Traceable fixed expenses 52% 22% 36% $ 278,000 $ 326,000 $ 200,000 Required: 1. Prepare a contribution format Income statement segmented by divisions. 2-8. The Marketing Department has proposed increasing the West Division's monthly advertising by $27,000 based on the belief that it would increase that division's sales by 13%. Assuming these estimates are accurate, how much…arrow_forwardLeslie Corporation uses both ROI and residual income (RI) to measure performance. One of the company's divisions currently has $480,000 of capital invested in assets and is expected to earn operating income of $120,000 in the current period. The division is considering an investment in new equipment costing $345,000 that will likely increase its annual operating income by $45,000. The minimum ROI for all divisions within the company is 9%. 1. If the division does not purchase the equipment, its estimated ROI will be %. 2. If the division invests in the equipment, its ROI will likely decrease to %. 3. If the division does not purchase the equipment, its estimated RI will be $ 4. If the division invests in the equipment, its RI will likely increase to $arrow_forward
- Carns Company is considering eliminating its Small Tools Division, which reported a loss for the prior year of $95,000 as shown below. Segment Income (Loss) Sales Variable costs 1,320,000 1,185,000 Contribution margin 135,000 230,000 Fixed costs Income (loss) $ (95,000) If the Small Tools Division is dropped, all of its variable costs are avoidable, and $92,000 of its fixed costs are avoidable. The impact on Carns' Division would be: Multiple Choice $88,300 decrease $92,000 decrease $43,000 decrease areasearrow_forwardWingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales Variable expenses Contribution margin Fixed expenses $ 1,575, 000 659, 400 915, 600 1,007, 000 $ (01, 400) Net operating income (loss) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East $435, 000 West $540, 000 Sales Variable expenses as a percentage of sales Traceable fixed expenses S600, 000 40% $326, 000 48% 39% $264, 000 $197,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $28,000 based on the belief that it would increase that division's sales by 12%. Assuming these estimates are accurate, how much would…arrow_forwardThe Milbam Company has two divisions - East and West. The divisions have the following revenues and expenses: East West Sales P720,000 P350,000 Variable costs 370,000 240,000 Traceable fixed costs Allocated common corporate costs Net operating income (loss) 130,000 80,000 120,000 50,000 P100,000 P(20,000) Management at Milham is pondering the elimination of the West Division since it has shown an operating loss for the past several years. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Given these data, the elimination of the West Division would result in an overall company net operating income of: P100,000 P50,000 P120,000 P80,000arrow_forward
- Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format Income statement: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 1,601,000 530,090 1,070,910 1,178,000 $ (107,090) In an effort to resolve the problem, the company wants to prepare an Income statement segmented by division. Accordingly, the Accounting Department provided the following Information: Sales Variable expenses as a percentage of sales Traceable fixed expenses East $ 401,000 49% $ 293,000 Required 1 Complete this question by entering your answers in the tabs below. Required 1 Required 2A Required 2B Prepare a contribution format income statement segmented by divisions. Required: 1. Prepare a contribution format Income statement segmented by divisions. 2-a. The Marketing Department belleves increasing the West Division's monthly advertising by $30,000 will increase that division's sales…arrow_forwardGion Company is considering ellminating its Windows division, which reported a loss for the prior year of $92000 as shown below. Segment Income (Loss) Sales Variable costs Contribution margin Fixed costs Income (loss) $ 1,122,000 987,000 135,000 232,000 $ (97,000) If the Windows division is dropped, all of its variable costs are avoidable, and $150,800 of its fixed costs are avoidable. The impact on Glon's operating income from eliminating this business segment would bearrow_forwardThe managing director of Zambia plc has devolved some decision making to operating divisions but wants to be sure that decisions will be in line with group policy. In line with this he is investigating a recent decision to increase the price of the only product of Southern division of K14.50 per unit due to rising coSts.. The following information and estimates were available for the management of Southern division. Last year 75 000 units were sold at K12 each with a total unit cost of K9 of which K6 were variable costs. For the year ahead the following cost and demand estimates have been made. Unit variable costs Pessimist Probability 0.15 K7.00 per unit Most likely Probability 0.65 K6.50 per unit Optimistic Probability 0.20 K6.20 per unit Total fixed costs Pessimist Probability 0.30 increase by 50 % Most likely Probability 0.50 increase by 25 % Optimistic Probability…arrow_forward
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