Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Veronica Mars, a recent graduate of Bells accounting program, evaluated the operating performance of Pharoah Companys six divisions. Veronica made the following presentation to Pharoahs

Veronica Mars, a recent graduate of Bells accounting program, evaluated the operating performance of Pharoah Companys six divisions. Veronica made the following presentation to Pharoahs board of directors and suggested the Percy Division be eliminated. If the Percy Division is eliminated, she said, our total profits would increase by $27,100.

The Other Five Divisions Percy Division Total
Sales $1,665,000 $100,100 $1,765,100
Cost of goods sold 978,700 76,700 1,055,400
Gross profit 686,300 23,400 709,700
Operating expenses 528,700 50,500 579,200
Net income $157,600 $ (27,100 ) $130,500

In the Percy Division, cost of goods sold is $60,100 variable and $16,600 fixed, and operating expenses are $30,400 variable and $20,100 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forensic Accounting And Fraud Investigation For Non-Experts

Authors: Stephen Pedneault, Frank Rudewicz, Howard Silverstone, Michael Sheetz

3rd Edition

0470879599, 9780470879597

More Books

Students also viewed these Accounting questions

Question

What is ethnocentric bias?

Answered: 1 week ago