Karim Ahmed, a recent graduate of an accounting program, evaluated the operating performance of Lunar Company's four divisions. Karim Ahmed made the following presentation to the Lunar board of directors and suggested the Riffa Division be eliminated. "If the Riffa Division is eliminated," she said, "our total profits would increase by $20,000. The Other Four Riffat Divisions Division Sales $1,600,000 $110,000 Cost of goods sold 950,000 80,000 Gross profit 650,000 30,000 Operating expenses 500,000 50,000 Net income $150,000 ($20,000) In the Riffa Division, cost of goods sold is $65,000 variable and $15,000 fixed, and operating expenses are $40,000 vanabile and $10,000 fixed. None of the Riffa Division's feed costs will be eliminated if the division is discontinued. Required: (1) Prepare an incremental analysis to eliminate or keep a division decision Activate Windows (2) Is Karim Ahmed right about eliminating the Riffa Division? Why or why not? Wide

Karim Ahmed, a recent graduate of an accounting program, evaluated the operating performance of Lunar Company's four divisions. Karim Ahmed made the following presentation to the Lunar board of directors and suggested the Riffa Division be eliminated. "If the Riffa Division is eliminated," she said, "our total profits would increase by $20,000. The Other Four Riffat Divisions Division Sales $1,600,000 $110,000 Cost of goods sold 950,000 80,000 Gross profit 650,000 30,000 Operating expenses 500,000 50,000 Net income $150,000 ($20,000) In the Riffa Division, cost of goods sold is $65,000 variable and $15,000 fixed, and operating expenses are $40,000 vanabile and $10,000 fixed. None of the Riffa Division's feed costs will be eliminated if the division is discontinued. Required: (1) Prepare an incremental analysis to eliminate or keep a division decision Activate Windows (2) Is Karim Ahmed right about eliminating the Riffa Division? Why or why not? Wide

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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