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Is Veronica right about eliminating the Percy Division? Prepare a schedule to support your answer.

Is Veronica right about eliminating the Percy Division? Prepare a schedule to support your answer.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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E20.15 (LO 6), AN Veronica Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Dunn Company's six divisions. Veronica made the following presentation to Dunn's board of directors and suggested the Percy Division be eliminated. "If the Percy Division is eliminated," she said, "our total profits would increase by $26,000." Sales Cost of goods sold Gross profit Operating expenses Net income The Other Five Divisions $1,664,200 978,520 685,680 527,940 $ 157-740 Percy Division $100,000 76,000 24,000 50,000 $ (26,000) Total $1,764,200 1,054.520 709,680 577-940 131-740 In the Percy Division, cost of goods sold is $61,000 variable and $15,000 fixed, and operating expenses are $30,000 variable and $20,000 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Instructions Is Veronica right about eliminating the Percy Division? Prepare a schedule to support your answer.
Transcribed Image Text:E20.15 (LO 6), AN Veronica Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Dunn Company's six divisions. Veronica made the following presentation to Dunn's board of directors and suggested the Percy Division be eliminated. "If the Percy Division is eliminated," she said, "our total profits would increase by $26,000." Sales Cost of goods sold Gross profit Operating expenses Net income The Other Five Divisions $1,664,200 978,520 685,680 527,940 $ 157-740 Percy Division $100,000 76,000 24,000 50,000 $ (26,000) Total $1,764,200 1,054.520 709,680 577-940 131-740 In the Percy Division, cost of goods sold is $61,000 variable and $15,000 fixed, and operating expenses are $30,000 variable and $20,000 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Instructions Is Veronica right about eliminating the Percy Division? Prepare a schedule to support your answer.
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