Michelle Tracy, a recent graduate of Rolling's accounting program, evaluated the operating performance of Poway Company's six divisions. Michelle made the following presentation to Povvay's Board of Directors and suggested the Erie Division be eliminated. "If the Erie Division is eliminated," she said, "our total profits would increase by

$15,500."

In the Erie Division, cost of goods sold is $60,000 variable and $16,500 fixed, and operating expenses are $15,000 variable and $23,000 fixed. None of the Erie Division's fixed costs will be eliminated if the division is discontinued.

Instructions
Is Michelle right about eliminating the Erie Division? Prepare a schedule to support your answer.

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Sales Cost of goods sold Gross profit Operating expenses Net income The Other Five Divisions Erie Division Total $1,664,200 $ 99,000 $1,763,200 978,520 76.500 1,055,020 685,680 22,500 708,180 527,940 38,000 565,940 $ 157,740 $(15,500) $142,240