Question
No idea how to solve this. Please help! Judy Jean, a recent graduate of Rollings accounting program, evaluated the operating performance of Artie Companys six
No idea how to solve this. Please help!
Judy Jean, a recent graduate of Rollings accounting program, evaluated the operating performance of Artie Companys six divisions. Judy made the following presentation to Arties board of directors and suggested the Huron Division be eliminated. If the Huron Division is eliminated, she said, our total profits would increase by $25,990.
The Other Five Divisions | Huron Division | Total | |||||
Sales | $1,663,350 | $100,640 | $1,763,990 | ||||
Cost of goods sold | 977,390 | 76,540 | 1,053,930 | ||||
Gross profit | 685,960 | 24,100 | 710,060 | ||||
Operating expenses | 527,350 | 50,090 | 577,440 | ||||
Net income | $158,610 | $ (25,990) | $132,620 |
In the Huron Division, cost of goods sold is $59,500 variable and $17,040 fixed, and operating expenses are $25,700 variable and $24,390 fixed. None of the Huron Divisions fixed costs will be eliminated if the division is discontinued. Is Judy right about eliminating the Huron Division? Prepare a schedule to support your answer.
Net Income Increase (Decrease) Continue Eliminate 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) Judy is
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