Lisa Anderson, a recent graduate of Bell's accounting program, evaluated the operating performance of Wildhorse Company's six divisions. Lisa made the following presentation to Wildhorse'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 $25,500."

The Other

Five DivisionsPercy

DivisionTotalSales$1,665,000$100,700$1,765,700Cost of goods sold978,10076,6001,054,700Gross profit686,90024,100711,000Operating expenses528,10049,600577,700Net income$158,800$ (25,500)$133,300

In the Percy Division, cost of goods sold is $60,000 variable and $16,600 fixed, and operating expenses are $30,700 variable and $18,900 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued.

Is Lisa right about eliminating the Percy Division? make 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).)

ContinueEliminateNet Income

Increase

(Decrease)Sales$

$

$

Variable costsCost of goods sold

Operating expenses

Total variable

Contribution margin

Fixed costsCost of goods sold

Operating expenses

Total fixed

Net income (loss)$

$

$

Lisa is

incorrect

correct