H20-8-8

H20 8-8 Sharon Lee, a recent graduate of Bell's accounting program, evaluated the operating performance of Carla Vista Company's six divisions. Sharon made the following presentation to Carla Vista'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 $25,300." The Other Percy Five Divisions Division Total Sales $1,663,000 $100.900 $1,763,900 Cost of goods sold 978.400 76.500 1,054.900 Gross profit 684.600 24,400 709.000 Operating expenses 528,500 49.700 578.200 Net income $156,100 $ (25.300 ) $130.800 In the Percy Division, cost of goods sold is $60,100 variable and $16,400 fixed, and operating expenses are $29,100 variable and $20,600 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Is Sharon 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).) Net Income Increase Continue Eliminate [Decrease) 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) $ $ Sharon is