Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Sandra Robinson, a recent graduate of Marx University's accounting program, evaluated the operating performance of Blue Spruce Company's six divisions. Sandra made the following presentation
Sandra Robinson, a recent graduate of Marx University's accounting program, evaluated the operating performance of Blue Spruce Company's six divisions. Sandra made the following presentation to Blue Spruce's board of directors and suggested the Erie division be eliminated. "If the Erie division is eliminated," she said, "our total profits would increase by $24,300." In the Erie division, the cost of goods sold is $59,600 variable and $16,700 fixed, and operating expenses are $15,900 variable and $32,600 fixed. None of the Erie division's fixed costs will be eliminated if the division is discontinued. Is Sandra right about eliminating the Erie Division? Prepare a schedule to support your answer. (If an amount reduces the net income then enter with a negative sign preceding the number e.g. 15,000 or parenthesis, e.g. (15,000).) Net Income Increase Continue Eliminate (Decrease) Sales $1765000 $1664500 $100500 \begin{tabular}{|lll|} \hline Variable costs & & 1054400 \\ \hline Fixed costs & & \\ \hline Contribution margin & & \end{tabular} \begin{tabular}{|r||} \hline \hline 994800 \\ \hline \hline \multicolumn{1}{|c|}{669700} \\ \hline \end{tabular} \begin{tabular}{|r|} \hline \hline59600 \\ \hline \hline40900 \\ \hline \hline \end{tabular} Sandra is incorrect
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started