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    Contribution margin, incremental analysis, income statement

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    Lewis Manufacturing Company has four operating divisions. During the first quarter of 2005, the company reported aggregate income from operations of $176,000 and following division results. See attachment.


    a. Computer 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 cost 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.

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    Solution Summary

    Contribution margin, incremental analysis and income statement are computed. The course of actions to recommend for each division are determined.