Question

Problem 7-5 (Part Level Submission) Riverbed Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $191,000 and the following divisional results. Division Sales Cost of goods sold Selling and administrative expenses income (loss) from operations $250,000 205,000 70.000 (25,000) $199,000 190,000 64,000 (56,000) $496,000 297,000 61.000 $138,000 $443,000 255,000 $4.000 $134,000 Analysis reveals the following percentages of variable costs in each division. I 69% 37 Cost of goods sold Selling and administrative expenses II 89% 61 III 80% 51 IV 74% 5 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 (a) Your answer is correct Compute the contribution margin for Divisions I and II. (Enter negative amounts using either a negative sign preceding the number andrarenthese 1451)

Answer 1

Requirement b1
	Continue	Eliminate	Net income Increase (Decrease)
Contribution Margin	82,650		-82,650
Fixed costs
Cost of Goods Sold	63,550	31,775	31,775
Selling and administrative expenses	44,100	22,050	22050
Total fixed Expenses	107,650	53,825	53,825
Income(loss) from Operations	-25,000	-53825	-28,825