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 $25,700.”     The Other Five Divisions   Percy Division     Total   Sales   $1,663,000   $100,900     $1,763,900   Cost of goods sold   977,800   76,100     1,053,900   Gross profit   685,200   24,800     710,000   Operating expenses   526,900   50,500     577,400   Net income   $158,300   $ (25,700 )   $132,600   In the Percy Division, cost of goods sold is $59,300 variable and $16,800 fixed, and operating expenses are $30,400 variable and $20,100 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.   Continue   Eliminate   Net Income Increase (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 select an option                                                           incorrect correct

FINANCIAL ACCOUNTING
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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 $25,700.”

    The Other
Five Divisions
  Percy
Division
    Total  
Sales   $1,663,000   $100,900     $1,763,900  
Cost of goods sold   977,800   76,100     1,053,900  
Gross profit   685,200   24,800     710,000  
Operating expenses   526,900   50,500     577,400  
Net income   $158,300   $ (25,700 )   $132,600  


In the Percy Division, cost of goods sold is $59,300 variable and $16,800 fixed, and operating expenses are $30,400 variable and $20,100 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.

  Continue   Eliminate   Net Income
Increase
(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 select an option                                                           incorrect correct
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