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Laura Hall, a recent graduate of Handley University's accounting program, evaluated the operating performance of Indigo Company's six divisions. Laura made the following presentation to
Laura Hall, a recent graduate of Handley University's accounting program, evaluated the operating performance of Indigo Company's six divisions. Laura made the following presentation to Indigo's board of directors and suggested the Erie division be eliminated. "If the Erie division is eliminated," she said, "our total profits would increase by $23.800 Sales Cost of goods sold Gross profit Operating expenses Net income The Other Five Divisions $1,665,000 977,400 687,600 528,500 $159.100 Erie Division $100,700 76,600 24,100 47,900 $(23,800) Total $1,765,700 1,054,000 711,700 576,400 $135,300 In the Erie division, the cost of goods sold is $60.500 variable and $16,100 fixed and operating expenses are $14.200 variable and $33,700 fixed. None of the Erie division's fixed costs will be eliminated if the division is discontinued. Is Laura right about eliminating the Erie Division? Prepare a schedule to support your answer. (If an amount reduces the net income then enter with a negative sign preceding the numbereg. -15,000 or parenthesis, eg. (15,000).) Net Income Increase (Decrease) Continue Eliminate
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