Michelle Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Sandhill Company's six divisions. Michelle made the following presentation to Sandhill'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 $26,600." Sales Cost of goods sold Gross profit Operating expenses Net income The Other Five Divisions $1,664,000 978,000 686,000 526,300 $159,700 Percy Division $100,000 76,900 23,100 49,700 $(26,600) Total $1,764,000 1,054,900 709,100 576,000 $133,100 In the Percy Division, cost of goods sold is $60,800 variable and $16,100 fixed, and operating expenses are $31,600 variable and $18,100 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Is Michelle 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).)

Michelle Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Sandhill Company's six divisions. Michelle made the following presentation to Sandhill'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 $26,600." Sales Cost of goods sold Gross profit Operating expenses Net income The Other Five Divisions $1,664,000 978,000 686,000 526,300 $159,700 Percy Division $100,000 76,900 23,100 49,700 $(26,600) Total $1,764,000 1,054,900 709,100 576,000 $133,100 In the Percy Division, cost of goods sold is $60,800 variable and $16,100 fixed, and operating expenses are $31,600 variable and $18,100 fixed. None of the Percy Division's fixed costs will be eliminated if the division is discontinued. Is Michelle 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).)

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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