Reference no: EM132524041

Question 1: Calculate the contribution margin ratio for each division.

East = (550,000 - 580,000)/550,000 = 5.45%

West = (750,000 - 700,000)/750,000 = 6.66%

North = (950,000 - 825,000)/950,000 = 13.2%

South = (450,000 - 525,000)/450,000 = 16.7%

Question 2: Prepare separate schedules showing by how much (in dollars) companywide net operating income would increase or decrease as a result of shutting down each unprofitable division. First show the results of closing the South division only, then closing the East division only. Finally, show the results of closing both divisions.

Question 3: Now assume that if the South division were eliminated, some of its customers would purchase canoes from the East division. Sales of the East division would rise to $600,000. Calculate the companywide net operating income after factoring in the closure of the South division and the new higher sales of the East division.