Question
Veronica Mars, a recent graduate of Bells accounting program, evaluated the operating performance of Cullumber Companys six divisions. Veronica made the following presentation to Cullumbers
Veronica Mars, a recent graduate of Bells accounting program, evaluated the operating performance of Cullumber Companys six divisions. Veronica made the following presentation to Cullumbers board of directors and suggested the Percy Division be eliminated. If the Percy Division is eliminated, she said, our total profits would increase by $26,100.
The Other Five Divisions | Percy Division | Total | ||||||
---|---|---|---|---|---|---|---|---|
Sales | $1,663,000 | $100,900 | $1,763,900 | |||||
Cost of goods sold | 977,300 | 76,800 | 1,054,100 | |||||
Gross profit | 685,700 | 24,100 | 709,800 | |||||
Operating expenses | 528,400 | 50,200 | 578,600 | |||||
Net income | $157,300 | $ (26,100 | ) | $131,200 |
In the Percy Division, cost of goods sold is $59,500 variable and $17,300 fixed, and operating expenses are $31,000 variable and $19,200 fixed. None of the Percy Divisions fixed costs will be eliminated if the division is discontinued. Is Veronica 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 | $enter sales in dollars | $enter sales in dollars | $enter sales in dollars | ||||
Variable costs | |||||||
Cost of goods sold | enter Cost of goods sold in dollars | enter Cost of goods sold in dollars | enter Cost of goods sold in dollars | ||||
Operating expenses | enter Operating expenses in dollars | enter Operating expenses in dollars | enter Operating expenses in dollars | ||||
Total variable | enter a total of the two previous amounts | enter a total of the two previous amounts | enter a total of the two previous amounts | ||||
Contribution margin | enter a total amount for the first part | enter a total amount for the first part | enter a total amount for the first part | ||||
Fixed costs | |||||||
Cost of goods sold | enter Cost of goods sold in dollars | enter Cost of goods sold in dollars | enter Cost of goods sold in dollars | ||||
Operating expenses | enter Operating expenses in dollars | enter Operating expenses in dollars | enter Operating expenses in dollars | ||||
Total fixed | enter a total of the two previous amounts | enter a total of the two previous amounts | enter a total of the two previous amounts | ||||
Net income (loss) | $enter a total net income or loss amount | $enter a total net income or loss amount | $enter a total net income or loss amount |
Veronica is select an option correctincorrect |
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