Veronica Mars, a recent graduate of Bell\'s accounting program, evaluated the op
ID: 2467909 • Letter: V
Question
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 $26,100." In the Percy Division, cost of goods sold is $59,000 variable and 517,000 fixed, and operating expenses are 529,100 variable and $21,100 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.Explanation / Answer
Answer:
Continue
Eliminate
Net Income Increase / (Decrease)
Sales
$100,100
0
($100,100)
Variable Costs
Cost of Goods Sold
$59,000
0
$59,000
Operating Expenses
$29,100
0
$29,100
Total Variable Cost
$88,100
0
$88,100
Contribution Margin
$12,000
$0
($12,000)
Fixed Costs
Cost of Goods Sold
$17,000
$17,000
$0
Operating Expenses
$21,100
$21,100
$0
Total Fixed Cost
$38,100
$38,100
$0
Net Income (Loss)
($26,100)
($38,100)
($12,000)
Veronica is WRONG.
If the Percy Division is eliminated, still there will be a loss of $12,000 due to unavoidable fixed cost.
Continue
Eliminate
Net Income Increase / (Decrease)
Sales
$100,100
0
($100,100)
Variable Costs
Cost of Goods Sold
$59,000
0
$59,000
Operating Expenses
$29,100
0
$29,100
Total Variable Cost
$88,100
0
$88,100
Contribution Margin
$12,000
$0
($12,000)
Fixed Costs
Cost of Goods Sold
$17,000
$17,000
$0
Operating Expenses
$21,100
$21,100
$0
Total Fixed Cost
$38,100
$38,100
$0
Net Income (Loss)
($26,100)
($38,100)
($12,000)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.