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Dorothy Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Sandhill Company's six divisions. Dorothy made the following presentation to Sandhill's
Dorothy Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Sandhill Company's six divisions. Dorothy made the following presentation to Sandhill'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 $26,600." The Other Five Divisions Percy Division Total Sales $1,664,000 $100,500 $1,764,500 Cost of goods sold 978,500 76,700 1,055,200 Gross profit 685,500 23,800 709,300 Operating expenses 527,500 50,400 577,900 Net income $158,000 $(26,600) $131,400 In the Percy Division, cost of goods sold is $59,400 variable and $17,300 fixed, and operating expenses are $30,100 variable and $20,300 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Is Dorothy 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 eg. (45).) Net Income Increase (Decrease) Continue Eliminate Sales $ $ Variable costs Cost of goods sold Operating expenses Total variable Contribution margin Fixed costs Cost of goods sold Operating expenses Total fixed Net income (loss) $ $ $ Dorothy is
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