Reference no: EM132408468

Question

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.

Compute the contribution margin for Divisions I and II.