Sandhill has three divisions: Bud, Wise, and ER. The results of May, 2022 are presented below: Bud Wise ER Total Units sold 5,200 6,700 3,900 15,800 Revenue $80,000 $60,900 $29,700 $170,600 Less variable costs 36,400 41,900 13,800 92,100 Less direct fixed costs 15,400 25,800 12,800 54,000 Less allocated fixed costs 3,400 4,400 2,500 10,300 Net income $24,800 ($11,200) $600 $14,200 All of the allocated costs will continue even if a division is discontinued. Sandhill allocates indirect fixed costs based on the number of units to be sold. Since the Wise Division has a net loss, Sandhill feels that it should be discontinued. Sandhill feels if the division is closed, that sales at the Bud Division will increase by 30%, and that sales at the ER Division will stay the same. (a) Prepare an analysis showing the effect of discontinuing the Wise Division. (Do not round intermediate calculations. Round final answers to O decimal places, e.g. 1,525.) Bud ER Total
Sandhill has three divisions: Bud, Wise, and ER. The results of May, 2022 are presented below: Bud Wise ER Total Units sold 5,200 6,700 3,900 15,800 Revenue $80,000 $60,900 $29,700 $170,600 Less variable costs 36,400 41,900 13,800 92,100 Less direct fixed costs 15,400 25,800 12,800 54,000 Less allocated fixed costs 3,400 4,400 2,500 10,300 Net income $24,800 ($11,200) $600 $14,200 All of the allocated costs will continue even if a division is discontinued. Sandhill allocates indirect fixed costs based on the number of units to be sold. Since the Wise Division has a net loss, Sandhill feels that it should be discontinued. Sandhill feels if the division is closed, that sales at the Bud Division will increase by 30%, and that sales at the ER Division will stay the same. (a) Prepare an analysis showing the effect of discontinuing the Wise Division. (Do not round intermediate calculations. Round final answers to O decimal places, e.g. 1,525.) Bud ER Total
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sandhill has three divisions: Bud, Wise, and ER. The results of May, 2022 are presented below:
Bud
Wise
ER
Total
Units sold
5,200
6,700
3,900
15,800
Revenue
$80,000
$60,900 $29,700
$170,600
Less variable costs
36,400
41,900
13,800
92,100
Less direct fixed costs
15,400
25,800
12,800
54,000
Less allocated fixed costs
3,400
4,400
2,500
10,300
Net income
$24,800
($11,200)
$600
$14,200
All of the allocated costs will continue even if a division is discontinued. Sandhill allocates indirect fixed costs based on the number of
units to be sold. Since the Wise Division has a net loss, Sandhill feels that it should be discontinued. Sandhill feels if the division is
closed, that sales at the Bud Division will increase by 30%, and that sales at the ER Division will stay the same.
(a)
Prepare an analysis showing the effect of discontinuing the Wise Division. (Do not round intermediate calculations. Round
final answers to O decimal places, e.g. 1,525.)
Bud
ER
Total
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