Carol Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Sheridan Company's...

Transcribed Image Text:

Carol Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Sheridan Company's six divisions. Carol made the following presentation to Sheridan's board of directors and suggested the Percy Division be eliminated. "If the Percy Division is eliminated," she said, "our total profits would increase by $26,400." The Other Five Divisions Percy Division Total Sales $1,663,000 $100,400 $1,763,400 Cost of goods sold 977,200 77,000 1,054,200 Gross profit 685,800 23,400 709,200 Operating expenses 528,500 49,800 578,300 Net income $157,300 $ (26,400 ) $130,900 In the Percy Division, cost of goods sold is $60,600 variable and $16,400 fixed, and operating expenses are $30,900 variable and $18,900 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Is Carol right about eliminating the Percy Division? Prepare a schedule to support your answer. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Sales Variable costs Cost of goods sold Operating expenses Total variable Contribution margin Fixed costs +A Cost of goods sold Operating expenses Total fixed Net income (loss) Carol is incorrect correct Continue +A Net Income Eliminate Increase (Decrease) $ $ $ Carol Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Sheridan Company's six divisions. Carol made the following presentation to Sheridan's board of directors and suggested the Percy Division be eliminated. "If the Percy Division is eliminated," she said, "our total profits would increase by $26,400." The Other Five Divisions Percy Division Total Sales $1,663,000 $100,400 $1,763,400 Cost of goods sold 977,200 77,000 1,054,200 Gross profit 685,800 23,400 709,200 Operating expenses 528,500 49,800 578,300 Net income $157,300 $ (26,400 ) $130,900 In the Percy Division, cost of goods sold is $60,600 variable and $16,400 fixed, and operating expenses are $30,900 variable and $18,900 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Is Carol right about eliminating the Percy Division? Prepare a schedule to support your answer. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Sales Variable costs Cost of goods sold Operating expenses Total variable Contribution margin Fixed costs +A Cost of goods sold Operating expenses Total fixed Net income (loss) Carol is incorrect correct Continue +A Net Income Eliminate Increase (Decrease) $ $ $