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 $27,000.” The OtherFive Divisions PercyDivision Total Sales $1,665,000 $100,000 $1,765,000 Cost of goods sold 978,300 76,600 1,054,900 Gross profit 686,700 23,400 710,100 Operating expenses 528,100 50,400 578,500 Net income $158,600 $ (27,000) $131,600 In the Percy Division, cost of goods sold is $60,100 variable and $16,500 fixed, and operating expenses are $29,200 variable and $21,200 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).) Continue Eliminate Net IncomeIncrease(Decrease) Sales $enter a dollar amount $enter a dollar amount $enter a dollar amount Variable costs Cost of goods sold enter a dollar amount enter a dollar amount enter a dollar amount Operating expenses enter a dollar amount enter a dollar amount enter a dollar amount Total variable enter a total of the two previous amounts enter a total of the two previous amounts enter a total of the two previous amounts Contribution margin enter a dollar amount enter a dollar amount enter a dollar amount Fixed costs Cost of goods sold enter a dollar amount enter a dollar amount enter a dollar amount Operating expenses enter a dollar amount enter a dollar amount enter a dollar amount Total fixed enter a total of the two previous amounts enter a total of the two previous amounts enter a total of the two previous amounts Net income (loss) $enter a dollar amount $enter a dollar amount $enter a dollar amount Veronica is select an option

Elimination of Division: You may have gotten the impression by now that the elimination procedure is…

Answered: Veronica Mars, a recent graduate of…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 69C: Keep or Drop a Division Jan Shumard, president and general manager of Danbury Company, was concerned...

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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 $27,000.”

	The Other Five Divisions	Percy Division		Total
Sales	$1,665,000	$100,000		$1,765,000
Cost of goods sold	978,300	76,600		1,054,900
Gross profit	686,700	23,400		710,100
Operating expenses	528,100	50,400		578,500
Net income	$158,600	$ (27,000	)	$131,600

In the Percy Division, cost of goods sold is $60,100 variable and $16,500 fixed, and operating expenses are $29,200 variable and $21,200 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).)

	Continue	Eliminate	Net Income Increase (Decrease)
Sales	$enter a dollar amount	$enter a dollar amount	$enter a dollar amount
Variable costs
Cost of goods sold	enter a dollar amount	enter a dollar amount	enter a dollar amount
Operating expenses	enter a dollar amount	enter a dollar amount	enter a dollar amount
Total variable	enter a total of the two previous amounts	enter a total of the two previous amounts	enter a total of the two previous amounts
Contribution margin	enter a dollar amount	enter a dollar amount	enter a dollar amount
Fixed costs
Cost of goods sold	enter a dollar amount	enter a dollar amount	enter a dollar amount
Operating expenses	enter a dollar amount	enter a dollar amount	enter a dollar amount
Total fixed	enter a total of the two previous amounts	enter a total of the two previous amounts	enter a total of the two previous amounts
Net income (loss)	$enter a dollar amount	$enter a dollar amount	$enter a dollar amount

Veronica is select an option

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