reconcile the total income from operations 135 000 with the total income from operat 591868

Tryon Manufacturing Company has four operating divisions. During the first quarter of 2011, the company reported aggregate income from operations of $135,000 and the divisional results shown on the page.

			Division
	I	II	III	IV
Sales	$510,000	$390,000	$310,000	$170,000
Cost of goods sold	300,000	250,000	270,000	150,000
Selling and administrative expenses	60,000	80,000	65,000	70,000
Income (loss) from operations	$150,000	$ 60,000	$ (25,000)	$(50,000)

Analysis reveals the following percentages of variable costs in each division.

	I	II	III	IV
Cost of goods sold	70%	80%	75%	90%
Selling and administrative expenses	40	50	60	70

Discontinuance of any division would save 50% of the fixed costs and expenses for that division.

Top management is very concerned about the unprofitable divisions (III and IV). Consensus is that one or both of the divisions should be discontinued.

Instructions

(a) Compute the contribution margin for Divisions III and IV.

(b) Prepare an incremental analysis concerning the possible discontinuance of (1) Division III and (2) Division IV. What course of action do you recommend for each division?

(c) Prepare a columnar condensed income statement for Tryon Manufacturing, assuming Division IV is eliminated. Use the CVP format. Division IV’s unavoidable fixed costs are allocated equally to the continuing divisions.

(d) Reconcile the total income from operations ($135,000) with the total income from operations without Division IV.