Reference no: EM132620099
Question - Cheyenne 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.
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.
Required - Compute the contribution margin for Divisions I and II.