ve orica Mars, a rocent graduate o Be scounting program avaluated tn operating p
ID: 2582116 • Letter: V
Question
ve orica Mars, a rocent graduate o Be scounting program avaluated tn operating performance cf Dunn Camparv s s di ns ons. Varonica made the allo ng prasentatian to Dunn's board of directors and suggested tha Pancy s eliminated, she said, or tatal profits would increas by $27,000 vision be alimiratad the Pancy Division ThOther Percy Five Division Division Total Salas Cast of goads sald Gross profit 41,663,000 10D,31 1,763,310 979,700 ,B 1,055,500 707,800 527,700 50,500 578,200 $156.600$(27,01:01) 12.610 684,300 23,500 Net inceme In the Percy Division cost of goods sold is s 0,000 venable and $16 600 fixed and oze ating expenses . e $30 000 variable and $19,700 fixed. None of the Percy D ision's fixed costs will be eliminated f the d ision is discontinued Is Veronica ri ht abo at eliminating the Pere Divisioni? prepare-schedule to su part y ur answer Enter e ative amounts using either a negative si u, preceding the number eg.-45 or arentheses e g 45 Nct Income Continue Eliminate (Decrease) Ssles Variable costs Cost of goods sald Oparating expenses Total varisble Contributian marginExplanation / Answer
Calculation of net income(loss) in case of continuing as well as eliminating of Percy division
Contribution margin
(C = A-B)
As it can be shown in the above table that net loss has been increased by $9,500 from $27,000 in case of continuing Percy Division to $36,500 in case of eliminating Percy Division. Thus Veronica is not right about eliminating the Percy Division.
Particulars Continue (in $) Eliminate (in $) Net Income increase(decrease) (in $) Sales (A) 100,300 0 (100,300) Variable Costs : Cost of goods sold (60,000) 0 60,000 Operating expenses (30,800) 0 30,800 Total Variable (B) (90,800) 0 90,800Contribution margin
(C = A-B)
9,500 0 (9,500) Fixed Costs Cost of goods sold (16,800) (16,800) 0 Operating expenses (19,700) (19,700) 0 Total Fixed (D) (36,500) (36,500) 0 Net Income(Loss) (27,000) (36,500) (9,500)Related Questions
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