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 $26,300.”

The Other
Five Divisions Percy
DivisionTotalSales$1,663,000$101,000$1,764,000Cost of goods sold979,00076,900 1,055,900Gross profit684,00024,100 708,100Operating expenses528,10050,400 578,500Net income$155,900$ (26,300)$129,600

In the Percy Division, cost of goods sold is $60,400 variable and $16,500 fixed, and operating expenses are $29,000 variable and $21,400 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).)

		enter sales in dollars		enter sales in dollars		enter sales in dollars
		enter the cost of goods sold in dollars		enter the cost of goods sold in dollars		enter the cost of goods sold in dollars
		enter operating expenses in dollars		enter operating expenses in dollars		enter operating expenses in dollars
		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts
		enter contribution margin in dollars		enter contribution margin in dollars		enter contribution margin in dollars
		enter the cost of goods sold in dollars		enter the cost of goods sold in dollars		enter the cost of goods sold in dollars
		enter operating expenses in dollars		enter operating expenses in dollars		enter operating expenses in dollars
		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts		enter a subtotal of the two previous amounts
		enter net income or loss in dollars		enter net income or loss in dollars		enter net income or loss in dollars

select an option                                                          incorrectcorrect

Answer 1

Answer-

Veronica Mars
DIFFERENTIAL ANALYSIS (Percy Divisions)
PARTICULARS	CONTINUE	ELIMINATE	NET INCOME INCREASE (DECREASE)
	$	$	$
Sales	101000	0	-101000
Less- Variable Costs
Cost of goods sold	60400	0	-60400
Operating expenses	29000	0	-29000
Total Variable costs	89400	0	-89400
Contribution margin	11600	0	-11600
Less- Fixed costs
Cost of goods sold	16500	16500	0
Operating expenses	21400	21400	0
Total Fixed costs	37900	37900	0
Net Income (Loss)	-26300	-37900	11600

Veronica is not right about eliminating the Percy Division. If Percy division will eliminate, Dunn Company will loose its profits by $11600.