60.1K

Verified Solution

Link Copied!

vs4

. , Division. Both divisions manufacture and sell logs to paper manufacturers. The company is considering disposing of the B Division since it has been consistently unprofitable for a number of years. The income statements for the two divisions for the year ended December 31, 2020 are presented 18 below: 88 A Division $400,000 B Division $300,000 Total $700,000 350,000 150,000 200,000 Sales Cost of goods sold Gross profit 350,000 100,000 250,000 320,000 120.000 200,000 $30,000 Selling & administrative expenses Net income $(20,000) 5 $50,000 Meeting om 18 In the B Division, 80% of cost of goods sold is variable costs and 20% of selling and administrative expenses are variable costs. The management of the company feels it can save $30,000 of fixed cost of goods sold and $30,000 of fixed selling expenses if it discontinues operation of the B Division 21 Instructions a) Determine whether the company should discontinue operating the B Division b) If the company had discontinued the division for 2020, determine what net income would have been reported. 100% Question 21 (5 points) Herman Corporation operates two divisions, the A Division and the B Division. Both divisions manufacture and sell logs to paper manufacturers. The company is considering disposing of the B Division since it has been consistently unprofitable for a number of years. The income statements for the two divisions for the year ended December 31, 2020are presented below: Colase A Division B Division $300,000 Total $700,000 $400,000 350,000 200,000 150,000 350,000 Sales Cost of goods sold Gross profit 100,000 5 250,000 320,000 120.000 200,000 $30,000 Meeting now 18 Selling & administrative expenses Net income 21 $50,000 $(20,000) In the B Division, 80% of cost of goods sold is variable costs and 20% of selling and administrative expenses are variable costs. The management of the company feels it can save $30,000 of fixed cost of goods sold and $30,000 of fixed selling expenses if it discontinues operation of the B Division Instructions a) Determine whether the company should discontinue operating the B Division

Answer & Explanation Solved by verified expert

See Answer