Question
Lily Mars, a recent graduate of Bells accounting program, evaluated the operating performance of Dunn Companys six divisions. Lily made the following presentation to Dunns
Lily Mars, a recent graduate of Bells accounting program, evaluated the operating performance of Dunn Companys six divisions. Lily made the following presentation to Dunns board of directors and suggested the Percy Division be eliminated. If the Percy Division is eliminated, she said, our total profits would increase by $26,300. The Other Five Divisions Percy Division Total Sales $1,663,000 $101,000 $1,764,000 Cost of goods sold 979,000 76,900 1,055,900 Gross profit 684,000 24,100 708,100 Operating expenses 528,100 50,400 578,500 Net income $155,900 $ (26,300 ) $129,600 In the Percy Division, cost of goods sold is $60,400 variable and $16,500 fixed, and operating expenses are $29,000 variable and $21,400 fixed. None of the Percy Divisions fixed costs will be eliminated if the division is discontinued. Is Lily 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).) Continue Eliminate Net Income Increase (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) $ $ $ Lily is
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