# Brislin Company has four operating divisions. During the first quarter of 2017, the company...

## Question:

Brislin Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $231,300 and the following divisional results : Division I II III IV Sales$253,000 $195,000$502,000 $449,000 Cost of goods sold$197,000 $190,000$295,000 $246,000 Selling and administrative expenses$75,700 $57,000$60,000 $47,000 Income (loss) from operations$(19,700) $(52,000)$147,000 $156,000 Analysis reveals the following percentages of variable costs in each division : I II III IV Cost of goods sold 67% 89% 81% 73% Selling and administrative expenses 37% 62% 48% 59% Discontinuance of any division would save 50% of the fixed costs and expenses for that division. Top Management is very concerned about the unprofitable divisions ( I and II ). Consensus is that one or both of the divisions should be discontinued. 1.) Compute the contribution margin for Divisions I and II. ( Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45) ) Division I Division II Contribution Margin 2.) Prepare an incremental analysis concerning the possible discontinuance of Division I. ( Round answers to 0 decimal places, e.g. 1,525. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease)$ 
Contribution Margin
Fixed Costs
Cost of goods sold
Total Fixed expenses
Income (Loss) from operations  $## Eliminating a Division: The relevant costs to consider when calculating the financial impact that closing a division will have should all be avoidable if the division is closed. These usually includes all the variable costs but only some (or none) of the fixed costs. ## Answer and Explanation: (a) Division I Division II Sales revenue$253,000 $195,000 Variable Costs Cost of goods sold 131,990 ($197,000 x 0.67)
169,100
Selling and administrative expenses 28,009 35,340
Contribution margin $93,001 ($9,440)

2.)

#### Division I - Incremental Analysis

Continue Eliminate Net Income Increase (Decrease)
Sales revenue $253,000 0$(253,000)
Variable Costs
Cost of goods sold 131,900 0 131,900
Selling and administrative expenses 28,009 0 28,009
Contribution margin $93,001 0$(93,001)
Fixed Costs
Cost of goods sold 65,010
($197,000 x 0.33) 32,505 (50% will be avoided) 32,505 Selling and administrative expenses 47,691 23,845 23,846 Operating Income (Loss)$(19,700) $(56,350)$(36,650) 