A recent accounting graduate from Marvel State University evaluated the operating performance of Ivanhoe Company's four divisions. The following presentation was made to Ivanhoe's Board of Directors. During the presentation, the accountant made the recommendation to eliminate the Southern Division stating that total net income would increase by $64,800. (See analysis below.)

		Other Three Divisions				Southern Division				Total
Sales			$2,160,000				$518,400			$2,678,400
Cost of Goods Sold			1,026,000				432,000			1,458,000
Gross Profit			1,134,000				86,400			1,220,400
Operating Expenses			864,000				151,200			1,015,200
Net Income			$270,000				$(64,800)			$205,200

For the other divisions, cost of goods sold is 80% variable and operating expenses are 70% variable. The cost of goods sold for the Southern Division is 30% fixed, and its operating expenses are 75% fixed. If the division is eliminated, only $16,200 of the fixed operating costs will be eliminated.

(a)

Prepare a correct analysis using incremental analysis for the new accountant. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any field blank. Enter 0 for the amounts. List variable expenses before fixed expenses.)

		Continue		Eliminate		Net Income Increase (Decrease)
select an item SalesFixed ExpensesCost of Goods SoldVariable ExpensesOperating ExpensesNet Profit / (Loss)Contribution MarginTotal Variable Costs		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an opening name for section one Net Profit / (Loss)Variable ExpensesCost of Goods SoldTotal Variable CostsSalesContribution MarginFixed ExpensesOperating Expenses
select an item Cost of Goods SoldOperating ExpensesNet Profit / (Loss)Contribution MarginVariable ExpensesTotal Variable CostsFixed ExpensesSales		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Net Profit / (Loss)Operating ExpensesVariable ExpensesContribution MarginCost of Goods SoldFixed ExpensesSalesTotal Variable Costs		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a closing name for section one Net Profit / (Loss)Cost of Goods SoldOperating ExpensesContribution MarginTotal Variable CostsSalesVariable ExpensesFixed Expenses		enter a total amount for section one		enter a total amount for section one		enter a total amount for section one
select a summarizing line for the first part Contribution MarginFixed ExpensesSalesTotal Variable CostsNet Profit / (Loss)Cost of Goods SoldVariable ExpensesOperating Expenses		enter a total amount for the first part		enter a total amount for the first part		enter a total amount for the first part
select an opening name for section two Total Variable CostsFixed ExpensesSalesNet Profit / (Loss)Cost of Goods SoldContribution MarginOperating ExpensesVariable Expenses
select an item Net Profit / (Loss)Fixed ExpensesCost of Goods SoldSalesTotal Variable CostsContribution MarginOperating ExpensesVariable Expenses		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Fixed ExpensesCost of Goods SoldVariable ExpensesSalesOperating ExpensesContribution MarginTotal Variable CostsNet Profit / (Loss)		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a closing name Total Variable CostsVariable ExpensesCost of Goods SoldContribution MarginNet Profit / (Loss)Operating ExpensesFixed ExpensesSales		$enter a total net income or loss amount		$enter a total net income or loss amount		$enter a total net income or loss amount