Judy Jean, a recent graduate of Rolling’s accounting program, evaluated the operating performance of Artie Company’s six divisions. Judy made the following presentation to Artie’s board of directors and suggested the Huron Division be eliminated. “If the Huron Division is eliminated,” she said, “our total profits would increase by $26,000.”

The Other Huron Five Divisions Division Total Sales $1,664,200 $100,000 $1,764,200 Cost of goods sold 978,520 76,000 1,054,520 Gross profi t 685,680 24,000 709,680 Operating expenses 527,940 50,000 577,940 Net income $ 157,740 $ (26,000) $ 131,740 In the Huron Division, cost of goods sold is $61,000 variable and $15,000 fixed, and operating expenses are $26,000 variable and $24,000 fixed. None of the Huron Division’s fixed costs will be eliminated if the division is discontinued.

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

AppendixLO1