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 $26,200.”     The Other Five Divisions   Percy Division     Total   Sales   $1,663,000   $100,100     $1,763,100   Cost of goods sold   978,600   76,800     1,055,400   Gross profit   684,400   23,300     707,700   Operating expenses   526,000   49,500     575,500   Net income   $158,400   $ (26,200 )   $132,200   In the Percy Division, cost of goods sold is $59,300 variable and $17,500 fixed, and operating expenses are $31,400 variable and $18,100 fixed. None of the Percy Division’s 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).)

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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 $26,200.”

    The Other
Five Divisions
  Percy
Division
    Total  
Sales   $1,663,000   $100,100     $1,763,100  
Cost of goods sold   978,600   76,800     1,055,400  
Gross profit   684,400   23,300     707,700  
Operating expenses   526,000   49,500     575,500  
Net income   $158,400   $ (26,200 )   $132,200  

In the Percy Division, cost of goods sold is $59,300 variable and $17,500 fixed, and operating expenses are $31,400 variable and $18,100 fixed. None of the Percy Division’s 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).)
Net Income
Increase
Continue
Eliminate
(Decrease)
Sales
$
$
$
Variable costs
Cost of goods sold
Operating expenses
Total variable
Contribution margin
Fixed costs
Cost of goods sold
Operating expenses
Total fixed
Net income (loss)
$
$
$
Veronica is
eTextbook and Media
%24
%24
%24
Transcribed Image Text:Net Income Increase Continue Eliminate (Decrease) Sales $ $ $ Variable costs Cost of goods sold Operating expenses Total variable Contribution margin Fixed costs Cost of goods sold Operating expenses Total fixed Net income (loss) $ $ $ Veronica is eTextbook and Media %24 %24 %24
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