Share
Explore BrainMass

Lewis Manufacturing

Please help with homework problem P9-5A, see attachment.

Book used Essentials of Accounting, 3rd Edition by Kimmel, Weygandt and Kieso

Instructions

(a) Compute the contribution margin for Divisions I and II.
(b) Prepare an incremental analysis concerning the possible discontinuance of (1) Division I and (2) Division II. What course of action do you recommend for each division?
(c) Prepare a columnar condensed income statement for Lewis Manufacturing, assuming Division II is eliminated. Use the CVP format. Division II's unavoidable fixed costs are allocated equally to the continuing divisions.
(d) Reconcile the total income from operations ($176,000) with the total income from operations without Division II.

Attachments

Solution Preview

See attached files.

P9-5A Lewis Manufacturing Company has four operating divisions. During the first quarter of 2005, the company reported aggregate income from operations of $176,000 and the following divisional results.

Division
I II III IV
Sales 250,000 200,000 500,000 400,000
Cost of goods sold 200,000 189,000 300,000 250,000
Selling and admin. Exp. 65,000 60,000 60,000 50,000
Income (loss) from operations(15,000) (49,000) 140,000 100,000

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

I II III IV
Cost of goods sold 70% 90% 80% 75%
Selling and admin. ...

Solution Summary

This solution is comprised of a detailed explanation to compute the contribution margin for Divisions I and II.

$2.19