Ben Blum recently graduated from Moonshadow University's accounting program. He has been hired as an analyst by Primrose Tire Company and one of his first assigned tasks was to evaluate the North East division of Primrose. This division has been heavily focused on producing a special snow and mud tire. Sales of the special tire have been disappointing and management is now evaluating whether to eliminate the North East division. Ben performed the following analysis and is preparing to address the Board of Directors of Primrose with his recommendation that the North East division should be eliminated, resulting in an increase to total company profit of $49,000. All Other Divisions $3,328, 400 1,957,040 $1,371, 360 1,055, 880 $ 315, 48O North East $200, 000 153,000 $ 47,000 96,000 $(49,000) Total Sales Revenue Cost of goods sold Gross profit Operating expenses Net operating income (loss) $3,528, 40o 2,110,040 $1,418,360 1,151, 880 266,480 The North East division's cost of goods sold includes $33,000 in fixed costs and operating expenses include $46,000 in fixed costs. None of the fixed costs will be eliminated if the North East division is discontinued. Required: Compute the contribution margin lost by the division. (Loss amounts should be indicated by a minus sign.)
Ben Blum recently graduated from Moonshadow University's accounting program. He has been hired as an analyst by Primrose Tire Company and one of his first assigned tasks was to evaluate the North East division of Primrose. This division has been heavily focused on producing a special snow and mud tire. Sales of the special tire have been disappointing and management is now evaluating whether to eliminate the North East division. Ben performed the following analysis and is preparing to address the Board of Directors of Primrose with his recommendation that the North East division should be eliminated, resulting in an increase to total company profit of $49,000. All Other Divisions $3,328, 400 1,957,040 $1,371, 360 1,055, 880 $ 315, 48O North East $200, 000 153,000 $ 47,000 96,000 $(49,000) Total Sales Revenue Cost of goods sold Gross profit Operating expenses Net operating income (loss) $3,528, 40o 2,110,040 $1,418,360 1,151, 880 266,480 The North East division's cost of goods sold includes $33,000 in fixed costs and operating expenses include $46,000 in fixed costs. None of the fixed costs will be eliminated if the North East division is discontinued. Required: Compute the contribution margin lost by the division. (Loss amounts should be indicated by a minus sign.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please see question in picture attached to fill in table. Thank you
Transcribed Image Text:IWU-National & Global Students X
B 5.4 Connect: Cases and Prob x
Question 10 - 5.4 Connect: Cases X
M MHE Reader
+
A 25 https://ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=D0&launchUrl
...
ennect: Cases and Problems Assignment A
Saved
Save & Exit
Help
Submit
Check my work
Ben Blum recently graduated from Moonshadow University's accounting program. He has been hired as an analyst by Primrose Tire
Company and one of his first assigned tasks was to evaluate the North East division of Primrose. This division has been heavily
focused on producing a special snow and mud tire. Sales of the special tire have been disappointing and management is now
evaluating whether to eliminate the North East division. Ben performed the following analysis and is preparing to address the Board of
Directors of Primrose with his recommendation that the North East division should be eliminated, resulting in an increase to total
company profit of $49,000.
All Other
North
ook
Divisions
East
Total
Sales Revenue
Cost of goods sold
Gross profit
Operating expenses
$3,328, 400
1,957,040
$1,371, 360
1,055, 880
315, 480
$200, 000
153,000
$ 47,000
96,000
S(49,000)
$3,528,400
2,110,040
$1,418, 360
1,151, 880
$266,480
rint
ences
Net operating income (loss)
The North East division's cost of goods sold includes $33,000 in fixed costs and operating expenses include $46,000 in fixed costs.
None of the fixed costs will be eliminated if the North East division is discontinued.
Required:
Compute the contribution margin lost by the division. (Loss amounts should be indicated by a minus sign.)
Elimination of North East
Lost sales revenue
Less: avoidable variable expenses
Lost contribution margin
< Prev
10 of 20
Next >
4:29
3/23/
R
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education