Sales revenue Cost of goods sold Gross profit Operating expenses Net operating income (loss) All Other Divisions $ 3,328,400 1,957,040 $ 1,371,360 1,055,880 $ 315,480 Colorado Total $ 300,000 $ 3,628,400 153,000 2,110,040 $ 147,000 $ 1,518,360 196,000 1,251,880 $ (49,000) $266,480 The Colorado division's cost of goods sold includes $70,000 in fixed costs and operating expenses include $90,000 in fixed costs. None of the fixed costs will be eliminated if the
Sales revenue Cost of goods sold Gross profit Operating expenses Net operating income (loss) All Other Divisions $ 3,328,400 1,957,040 $ 1,371,360 1,055,880 $ 315,480 Colorado Total $ 300,000 $ 3,628,400 153,000 2,110,040 $ 147,000 $ 1,518,360 196,000 1,251,880 $ (49,000) $266,480 The Colorado division's cost of goods sold includes $70,000 in fixed costs and operating expenses include $90,000 in fixed costs. None of the fixed costs will be eliminated if the
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Barb Bach recently graduated from Coral College's accounting program. She has been
hired as an analyst by Rainier Ski Co., and one of her first assigned tasks was to evaluate
the Colorado division of Rainier Ski Co. This division has been heavily focused on
producing a special snowboard. Sales of the snowboard have been disappointing, and
management is now evaluating whether to eliminate the Colorado division. Barb
performed the following analysis and is preparing to address the board of directors of
Rainier Ski Co. with her recommendation that the Colorado division should be
eliminated, resulting in an increase to total company profit of $49,000.
Sales revenue
Cost of goods sold
Gross profit
Operating expenses
Net operating income (loss)
All Other Divisions
$ 3,328,400
1,957,040
$ 1,371,360
1,055,880
$ 315,480
Colorado
Total
$ 300,000
$ 3,628,400
153,000
2,110,040
$ 147,000
$ 1,518,360
196,000
1,251,880
$ (49,000) $ 266,480
The Colorado division's cost of goods sold includes $70,000 in fixed costs and operating
expenses include $90,000 in fixed costs. None of the fixed costs will be eliminated if the
Colorado division is discontinued.
Required:
Do you agree with Barb's analysis? Use incremental analysis to support your conclusion.
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