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Patti Lee, a recent graduate of a Bachelor of Business Program, is evaluating the operating performance of Popo Inc, which has six divisions. The Erie
Patti Lee, a recent graduate of a Bachelor of Business Program, is evaluating the operating performance of Popo Inc, which has six divisions. The Erie division is incurring a loss, while the other five divisions are all reporting healthy profits. The following information has been made available to Pattii Lee. Erie Division POPO Inc. The other five divisions TOTAL Sales $96,200 cost of goods sold $1,664,200 978,520 $1.760,400 1,054,990 76,470 19,730 705,410 Gross profit Operating expenses 685,680 527,940 43,600 571,540 Net Income $(23,870) $157,740 $133,870 In the Erie Division, the cost of goods sold is $71,000 variable and $5,470 fixed, and operating expenses are $9,000 variable and $34,600 fixed. If the Erie division is closed, 50% of its total fixed costs (ie: $5,470 and $34,600) would be avoidable Required: You must show all your calculations in order to get marks. If you provide the answer only you will not receive any marks. 1) Prepare a contribution type income statement for the Erie Division 2) Prepare an analysis to determine the impact on total profits if the Erle division is closed? ( Show all your calculations) 3) Should the Erie Division be closed
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