Gutierrez Company has four operating divisions. During the first quarter of 2014, the company reported aggregate income from operations of $199,700 and the following divisional results.
| Division | |||||||||
| I | II | III | IV | ||||||
| Sales | $248,400 | $196,300 | $499,900 | $446,900 | |||||
| Cost of goods sold | 202,500 | 190,300 | 302,200 | 246,900 | |||||
| Selling and administrative expenses | 74,300 | 64,900 | 60,000 | 50,700 | |||||
| Income (loss) from operations | $ (28,400) | $ (58,900) | $137,700 | $149,300 | |||||
Analysis reveals the following percentages of variable costs in each division.
| I | II | III | IV | ||||||
| Cost of goods sold | 77% | 90% | 78% | 77% | |||||
| Selling and administrative expenses | 38% | 70% | 49% | 59% |
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 (I and II). Consensus is that one or both of the divisions should be discontinued.
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Compute the contribution margin for Divisions I and II: Please explain how you got it thanks. |