Exercise 20-15 Veronica Mars, a recent graduate of Bell\'s accounting program, e
ID: 2554820 • Letter: E
Question
Exercise 20-15 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 Division Percy Total Sales Cost of goods sold Gross profit Operating expenses Net income $1,663,000 $100,900 $1,763,900 977,800 76,100 1,053,900 710,000 577,400 $158,300 $ (25,700) $132,600 685,200 24,800 526,900 50,500 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. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)Explanation / Answer
Answer
Continue
Eliminate
Net Income Increases (decreases)
Sales
$ 1,00,900.00
$ -
$ (1,00,900.00)
Variable Costs:
Cost of Goods Sold
$ 59,300.00
$ -
$ 59,300.00
Operating Expenses
$ 30,400.00
$ -
$ 30,400.00
Total Variable
$ 89,700.00
$ -
$ 89,700.00
Contribution margin
$ 11,200.00
$ -
$ (11,200.00)
Fixed Costs:
Cost of Goods Sold
$ 16,800.00
$ 16,800.00
$ -
Operating Expenses
$ 20,100.00
$ 20,100.00
$ -
Total Fixed
$ 36,900.00
$ 36,900.00
$ -
Net Income (Loss)
$ (25,700.00)
$ (36,900.00)
$ (11,200.00)
Rather, The Net Income will further decrease by $11200 which was the contribution margin that the division will not earn if its eliminated.
Continue
Eliminate
Net Income Increases (decreases)
Sales
$ 1,00,900.00
$ -
$ (1,00,900.00)
Variable Costs:
Cost of Goods Sold
$ 59,300.00
$ -
$ 59,300.00
Operating Expenses
$ 30,400.00
$ -
$ 30,400.00
Total Variable
$ 89,700.00
$ -
$ 89,700.00
Contribution margin
$ 11,200.00
$ -
$ (11,200.00)
Fixed Costs:
Cost of Goods Sold
$ 16,800.00
$ 16,800.00
$ -
Operating Expenses
$ 20,100.00
$ 20,100.00
$ -
Total Fixed
$ 36,900.00
$ 36,900.00
$ -
Net Income (Loss)
$ (25,700.00)
$ (36,900.00)
$ (11,200.00)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.