CALCULATOR MESSAGE MY INSTRUCTOR FULL SCREEN PRINTER VERSION ‘BACK Exercise 7-15

Question

CALCULATOR MESSAGE MY INSTRUCTOR FULL SCREEN PRINTER VERSION ‘BACK Exercise 7-15 Your answer is partially correct. Try again. 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 sugested the Percy Division be eliminated."1if the Percy Division lis eliminated," she said, "our total profits would increase by $26,600. The Other Percy Five Divisions Division Total Sales Cost of goods sold Gross profit Operating expenses Net income $1,665,000 $100,000 $1,765,000 978,500 76,200 1,054,700 710,300 526,300 50,400 576,700 $160,200 (26,600) $133,600 686,500 23,800 In the Percy Division, cost of goods sold is $60,300 variable and $15,900 fixed, and operating expenses are $29,900 variable and $20,500 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 eithera negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Explanation / Answer

Solution:

As net income will reduced by $9,800 on elmination of Percy division, therefore veronica is not right about eliminating the percy division.

Differential Analysis Particulars Continue Percy Division Eliminate Percy Division Net Income Increase (Decrease) Sales $100,000.00 $0.00 -$100,000.00 Variable Costs: Cost of Goods Sold $60,300.00 $0.00 -$60,300.00 Opearting Expenses $29,900.00 $0.00 -$29,900.00 Total Variable $90,200.00 $0.00 -$90,200.00 Contribution Margin $9,800.00 $0.00 -$9,800.00 Fixed Costs: Cost of Goods Sold $15,900.00 $15,900.00 $0.00 Opearting Expenses $20,500.00 $20,500.00 $0.00 Total Fixed $36,400.00 $36,400.00 Net Income (Loss) -$26,600.00 -$36,400.00 -$9,800.00

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