Monty Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $218,700 and the following divisional results. Division I II III...

Monty Company has four operating divisions. During the first quarter of 2017, the company reported aggregate income from operations of $218,700 and the following divisional results.

		Division
		I		II		III		IV
Sales		$253,000		$195,000		$501,000		$447,000
Cost of goods sold		197,000		194,000		296,000		250,000
Selling and administrative expenses		69,300		62,000		61,000		48,000
Income (loss) from operations		$ (13,300)		$ (61,000)		$144,000		$149,000

Analysis reveals the following percentages of variable costs in each division.

		I			II			III			IV
Cost of goods sold		72	%		89	%		79	%		76	%
Selling and administrative expenses		40			57			52			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.
(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Division I		Division II
Contribution margin		$		$

Prepare an incremental analysis concerning the possible discontinuance of Division I.
(
Round answers to 0 decimal places, e.g. 1525. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Continue		Eliminate		Net Income Increase (Decrease)
Contribution margin		$		$		$
Fixed costs
Cost of goods sold
Selling and administrative
Total fixed expenses
Income (loss) from operations		$		$		$

Prepare an incremental analysis concerning the possible discontinuance of Division II.
(
Round answers to 0 decimal places, e.g. 1525. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Continue		Eliminate		Net Income Increase (Decrease)
Contribution margin		$		$		$
Fixed costs
Cost of goods sold
Selling and administrative
Total fixed expenses
Income (loss) from operations		$		$		$

What course of action do you recommend for each division?

Division I		EliminatedContinued
Division II		ContinuedEliminated