Veronica Mars, a recent graduate of Bells accounting program, evaluated the operating performance of Dunn...
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Accounting
Veronica Mars, a recent graduate of Bells accounting program, evaluated the operating performance of Dunn Companys six divisions. Veronica made the following presentation to Dunns board of directors and suggested the Percy Division be eliminated. If the Percy Division is eliminated, she said, our total profits would increase by $ 25,300.
The OtherFive Divisions
Percy Division
Total
Sales
$ 1,663,000
$ 100,900
$ 1,763,900
Cost of goods sold
978,400
76,500
1,054,900
Gross profit
684,600
24,400
709,000
Operating expenses
528,500
49,700
578,200
Net income
$ 156,100
$ ( 25,300
)
$ 130,800
In the Percy Division, cost of goods sold is $ 60,100 variable and $ 16,400 fixed, and operating expenses are $ 29,100 variable and $ 20,600 fixed. None of the Percy Divisions 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).)
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