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xed costs d fixed costs 26,600 11,400 $34,200 36,100 19,000 $(9,500) 22,800 7,600 $15,200 85,500 38,000 $39.900 cated costs will continue even if a division is discontinued. Blossom allocates

xed costs d fixed costs 26,600 11,400 $34,200 36,100 19,000 $(9,500) 22,800 7,600 $15,200 85,500 38,000 $39.900 cated costs will continue even if a division is discontinued. Blossom allocates

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prepare an analysis showing the effect of discontinuing the Wise division. (Do not round intermediate calculations and round final answers to 0 decimal places, e.g. 1,525.) Revenue Less variable costs Less direct fixed costs Less allocated fixed costs Net income Bud $ $ Er I $ Total
Transcribed Image Text:Prepare an analysis showing the effect of discontinuing the Wise division. (Do not round intermediate calculations and round final answers to 0 decimal places, e.g. 1,525.) Revenue Less variable costs Less direct fixed costs Less allocated fixed costs Net income Bud $ $ Er I $ Total
Blossom, Inc. has three divisions: Bud, Wise, and Er. The results of operations for May, 2022 are presented below. Units sold Revenue Less variable costs Less direct fixed costs Less allocated fixed costs Net income Bud 5,700 $133,000 60,800 26,600 11,400 $34,200 Wise 9,500 $95,000 49,400 36,100 19,000 $(9,500) Er 3,800 $76,000 $304,000 30,400 140,600 85,500 38,000 $39.900 22,800 Total 7,600 $15,200 19,000 All of the allocated costs will continue even if a division is discontinued. Blossom allocates indirect fixed costs based on the number of units to be sold. Since the Wise division has a net loss, Blossom is concerned that it should be discontinued. Blossom thinks that if the division is closed, that sales at the Bud division will increase by 12% while sales at the Er division will stay the same.
Transcribed Image Text:Blossom, Inc. has three divisions: Bud, Wise, and Er. The results of operations for May, 2022 are presented below. Units sold Revenue Less variable costs Less direct fixed costs Less allocated fixed costs Net income Bud 5,700 $133,000 60,800 26,600 11,400 $34,200 Wise 9,500 $95,000 49,400 36,100 19,000 $(9,500) Er 3,800 $76,000 $304,000 30,400 140,600 85,500 38,000 $39.900 22,800 Total 7,600 $15,200 19,000 All of the allocated costs will continue even if a division is discontinued. Blossom allocates indirect fixed costs based on the number of units to be sold. Since the Wise division has a net loss, Blossom is concerned that it should be discontinued. Blossom thinks that if the division is closed, that sales at the Bud division will increase by 12% while sales at the Er division will stay the same.
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