In the huron division cost of goods sold is 55810 variable

Reference no: EM13573430

Judy Jean, a recent graduate of Rolling's accounting program, evaluated the operating performance of Artie Company's six divisions. Judy made the following presentation to the Artie board of directors and suggested the Huron Division be eliminated. "If the Huron Division is eliminated," she said, "our total profits would increase by $17,190."

	The Other Five Divisions	Huron Division		Total
Sales revenue	$1,666,400	$ 98,400		$1,764,800
Cost of goods sold	977,700	76,900		1,054,600
Gross profit	688,700	21,500		710,200
Operating expenses	528,500	38,690		567,190
Net income	$ 160,200	$(17,190	)	$ 143,010

In the Huron Division, cost of goods sold is $55,810 variable and $21,090 fixed, and operating expenses are $11,500 variable and $27,190 fixed. None of the Huron Division's fixed costs will be eliminated if the division is discontinued.

Prepare the incremental analysis for the decision to continue or eliminate the Huron division.

	Continue	Eliminate	Net Income Increase (Decrease)
Sales revenue	$	$	$
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)	$	$	$

Is Judy right about eliminating the Huron Division?

Reference no: EM13573430

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