Michelle Walker, a recent graduate of Bells accounting program, evaluated the operating performance of Sandhill Companys six divisions. Michelle made the following presentation to Sandhills 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		$100,000			$1,764,000
Cost of goods sold		978,000		76,900			1,054,900
Gross profit		686,000		23,100			709,100
Operating expenses		526,300		49,700			576,000
Net income		$159,700		$ (26,600	)		$133,100

In the Percy Division, cost of goods sold is $60,800 variable and $16,100 fixed, and operating expenses are $31,600 variable and $18,100 fixed. None of the Percy Divisions fixed costs will be eliminated if the division is discontinued. Is Michelle 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)		$		$		$

Michelle is

incorrect/correct