70.2K

Verified Solution

Link Copied!

Prepare a columnar condensed income statement for Sheffield Company, assuming Division II is eliminated. Division IIs unavoidable fixed costs are allocated equally to the continuing divisions.

Problem 7-5 (Part Level Submission) Sheffield Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $205,000 and the following divisional results. Division II III IV Sales Cost of goods sold Selling and administrative expenses Income (loss) from operations $247,000 200,000 75,000 $ (28,000) $198,000 190,000 64,000 $ (56,000) $501,000 298,000 63,000 $140,000 $448,000 254,000 45,000 $149,000 Analysis reveals the following percentages of variable costs in each division. Cost of goods sold Selling and administrative expenses I 67 % 38 II 88% 57 III 81 % 50 IV 78 % 5 7 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. , Divisions III IV Total I Sales 247,000 501,000 448,000 1196000 Variable costs DA Cost of goods sold -134000 -241380 -198120 -573500 Selling and administrative -28500 -31500 -25650 T -85650 Total variable costs -162500 -272880 -223770 659150 TE Contribution margin 84500 228120 224230 536850 Fixed costs ITUO HIIT Cost of goods sold 69800 60420 59680 189900 x Selling and administrative 50300 35300 23150 108750 Total fixed costs 120100 95720 82830 298650 Income (loss) from operations

Answer & Explanation Solved by verified expert

See Answer