Question & Answer: Veronica Mars, a recent graduate of Bell’s accounting program, evaluated the operating performance of Dun…..

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 $26,600.” The Other Five Divisions Percy Division Total Sales $1,665,000 $100,000 $1,765,000 Cost of goods sold 978,500 76,200 1,054,700 Gross profit 686,500 23,800 710,300 Operating expenses 526,300 50,400 576,700 Net income $160,200 $ (26,600 ) $133,600 In the Percy Division, cost of goods sold is $60,300 variable and $15,900 fixed, and operating expenses are $29,900 variable and $20,500 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