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 $27,000.” The Other Five Divisions Percy Division Total Sales $1,665,000 $100,000 $1,765,000 Cost of goods sold 978,300 76,600 1,054,900 Gross profit 686,700 23,400 710,100 Operating expenses 528,100 50,400 578,500 Net income $158,600 $ (27,000 ) $131,600 In the Percy Division, cost of goods sold is $60,100 variable and $16,500 fixed, and operating expenses are $29,200 variable and $21,200 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
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
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 $27,000.”

    The Other
Five Divisions
  Percy
Division
    Total  
Sales   $1,665,000   $100,000     $1,765,000  
Cost of goods sold   978,300   76,600     1,054,900  
Gross profit   686,700   23,400     710,100  
Operating expenses   528,100   50,400     578,500  
Net income   $158,600   $ (27,000 )   $131,600  


In the Percy Division, cost of goods sold is $60,100 variable and $16,500 fixed, and operating expenses are $29,200 variable and $21,200 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).)

    Continue   Eliminate   Net Income
Increase
(Decrease)
 
Sales   $enter a dollar amount    $enter a dollar amount    $enter a dollar amount   
Variable costs              
   Cost of goods sold   enter a dollar amount   enter a dollar amount   enter a dollar amount  
   Operating expenses   enter a dollar amount   enter a dollar amount   enter a dollar amount  
      Total variable   enter a total of the two previous amounts   enter a total of the two previous amounts   enter a total of the two previous amounts  
Contribution margin   enter a dollar amount   enter a dollar amount   enter a dollar amount  
Fixed costs              
   Cost of goods sold   enter a dollar amount   enter a dollar amount   enter a dollar amount  
   Operating expenses   enter a dollar amount   enter a dollar amount   enter a dollar amount  
      Total fixed   enter a total of the two previous amounts   enter a total of the two previous amounts   enter a total of the two previous amounts  
Net income (loss)   $enter a dollar amount    $enter a dollar amount    $enter a dollar amount   

 

Veronica is select an option                                                         
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