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 $26,900.” The OtherFive Divisions PercyDivision Total Sales $1,665,000 $100,600 $1,765,600 Cost of goods sold 978,700 77,000 1,055,700 Gross profit 686,300 23,600 709,900 Operating expenses 527,200 50,500 577,700 Net income $159,100 $ (26,900) $132,200 In the Percy Division, cost of goods sold is $59,200 variable and $17,800 fixed, and operating expenses are $31,600 variable and $18,900 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: A division would be eliminated if it is continuously generating loss to the…

Answered: Veronica Mars, a recent graduate of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 $26,900.”

	The Other Five Divisions	Percy Division		Total
Sales	$1,665,000	$100,600		$1,765,600
Cost of goods sold	978,700	77,000		1,055,700
Gross profit	686,300	23,600		709,900
Operating expenses	527,200	50,500		577,700
Net income	$159,100	$ (26,900	)	$132,200

In the Percy Division, cost of goods sold is $59,200 variable and $17,800 fixed, and operating expenses are $31,600 variable and $18,900 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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