Question
Veronica Mars, a recent graduate of Bells accounting program, evaluated the operating performance of Dunn Companys six divisions. Veronica made the following presentation to Dunns
Veronica Mars, a recent graduate of Bells accounting program, evaluated the operating performance of Dunn Companys six divisions. Veronica made the following presentation to Dunns board of directors and suggested the Percy Division be eliminated. If the Percy Division is eliminated, she said, our total profits would increase by $25,700. The Other Five Divisions Percy Division Total Sales $1,663,000 $100,900 $1,763,900 Cost of goods sold 977,800 76,100 1,053,900 Gross profit 685,200 24,800 710,000 Operating expenses 526,900 50,500 577,400 Net income $158,300 $ (25,700 ) $132,600 In the Percy Division, cost of goods sold is $59,300 variable and $16,800 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.
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