Exercise 12-15 Veronica Mars, a recent graduate of Bell\'s accounting program, e

Question

Exercise 12-15 Veronica Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Bramble Company's six divisions. Veronica made the following presentation to Bramble'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 Division Percy Total Sales Cost of goods sold Gross profit Operating expenses Net income $1,663,000 $100,100 $1,763,100 978,600 76,800 1,055,400 707,700 575,500 $158,400 $ (26,200) $132,200 684,400 23,300 526,000 49,500 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. (If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Explanation / Answer

Solution:

As there is decrease in net operating income by $9,400 on elimination of percy division, therefore Veronica is not right about elminating the Percy Division.

Differential Analysis - Bramble Company Particulars Continue Percy Division Eliminate Percy Division Net Income Increase (Decrease) Sales $100,100.00 $0.00 -$100,100.00 Variable Costs: Cost of Goods Sold $59,300.00 $0.00 -$59,300.00 Opearting Expenses $31,400.00 $0.00 -$31,400.00 Total Variable $90,700.00 $0.00 -$90,700.00 Contribution Margin $9,400.00 $0.00 -$9,400.00 Fixed Costs: Cost of Goods Sold $17,500.00 $17,500.00 $0.00 Opearting Expenses $18,100.00 $18,100.00 $0.00 Total Fixed $35,600.00 $35,600.00 Net Income (Loss) -$26,200.00 -$35,600.00 -$9,400.00

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.