# Accounting: Incremental Analysis?

• Mar 31st 2013, 10:29 AM
salma
Accounting: Incremental Analysis?
Moreno Manufacturing Company has four operating divisions. During the first quarter of 2011, the company reported aggregate income from operations of \$175,800 and the following divisional results.
 Division I II III IV Sales \$249,000 \$197,500 \$504,200 \$402,900 Cost of goods sold 199,000 191,200 295,100 252,000 Selling and administrative expenses 69,300 61,400 57,600 52,200 Income (loss) from operations (\$19,300) (\$55,100) \$151,500 \$98,700
Analysis reveals the following percentages of variable costs in each division.
 I II III IV Cost of goods sold 70 % 89 % 81 % 76 % Selling and administrative expenses 41 69 51 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.

Compute the contribution margin for Divisions I and II.

I got:

Prepare an incremental analysis concerning the possible discontinuance of Division I.
 Continue Eliminate Net Income Increase (Decrease) Contribution margin \$http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif \$http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif \$http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif Fixed expenses Cost of goods sold http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif Selling and administrative http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif Total fixed expenses http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif Income (loss) from operations \$http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif \$http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif \$http://edugen.wileyplus.com/edugen/a...mmon/pixel.gif

This is what I have, but Im not sure if they're right. Someone please help me, this problems killing me.
• Mar 31st 2013, 10:33 AM
salma
Re: Accounting: Incremental Analysis?
I guess copying and pasting didnt work.
for the contribution margins, I got 69087 for Division 1 and 1354 for Division 2.
For the chart, under continue I have:
69087
61400
44474
105874
19300

Under Eliminate:
0
35696
19404
55100
55100

Under net income
69087
35696
19404
55100
13987