Question

Exercise 20-15 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 $24,900." Sales Cost of goods sold Gross profit Operating expenses Net income The Other Percy Five Divisions Division $1,665,000 $100,900 977.500 76,100 687,500 24,800 527,500 49,700 $160,000 $ (24,900) Total $1,765,900 1,053,600 712,300 577,200 $135,100 In the Percy Division, cost of goods sold is $60,400 variable and $15,700 fixed, and operating expenses are $29,100 variable and $20.600 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.o. (45).) Net Income Increase (Decrease) Continue Eliminate Sales Variable costs Cost of goods sold Operating expenses Total variable Contribution margin Fixed costs Cost of goods sold Operating expenses Total fixed Net income (loss) Veronica is

Exercise 20-15 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 $24,900.” The Other Five Divisions Percy Division Total Sales $1,665,000 $100,900 $1,765,900 Cost of goods sold 977,500 76,100 1,053,600 Gross profit 687,500 24,800 712,300 Operating expenses 527,500 49,700 577,200 Net income $160,000 $ (24,900 ) $135,100 In the Percy Division, cost of goods sold is $60,400 variable and $15,700 fixed, and operating expenses are $29,100 variable and $20,600 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 $ $ $ Variable costs    Cost of goods sold    Operating expenses       Total variable Contribution margin Fixed costs    Cost of goods sold    Operating expenses       Total fixed Net income (loss) $ $ $ Veronica is incorrectcorrect Click if you would like to Show Work for this question: Open Show Work

Answer 1

Answer-

Veronica Mars
DIFFERENTIAL ANALYSIS (Percy Divisions)
PARTICULARS	CONTINUE	ELIMINATE	NET INCOME INCREASE (DECREASE)
	$	$	$
Sales	100900	0	-100900
Less- Variable Costs
Cost of goods sold	60400	0	-60400
Operating expenses	29100	0	-29100
Total Variable costs	89500	0	-89500
Contribution margin	11400	0	-11400
Less- Fixed costs
Cost of goods sold	15700	15700	0
Operating expenses	20600	20600	0
Total Fixed costs	36300	36300	0
Net Income (Loss)	-24900	-36300	11400

Veronica is not right about eliminating the Percy Division. If Percy division will eliminate, Dunn Company will loose its profits by $11400.