Solution-Compute the contribution margin for Division I and

Compute the contribution margin for Division I and II

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Reference no: EM132426845

Problem - Pina Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $212,300 and the following divisional results.

	Division
	I	II	III	IV
Sales	$254,000	$199,000	$501,000	$443,000
Cost of goods sold	204,000	190,000	301,000	247,000
Selling and administrative expenses	69,700	61,000	57,000	55,000
Income (loss) from operations	$(19,700)	$(52,000)	$143,000	$141,000

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

	I	II	III	IV
Cost of goods sold	67%	90%	82%	75%
Selling and administrative expenses	39	62	50	58

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.

Required -

(a) Compute the contribution margin for Division I and II.

(b1) Prepare an incremental analysis concerning the possible discontinuance of Division I.

(b2) Prepare an incremental analysis concerning the possible discontinuance of Division II.

Reference no: EM132426845

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Compute the contribution margin for Division I and II

Reference no: EM132426845

Reference no: EM132426845

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