Is sharon right about eliminating the percy division

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Question - Sharon Lee, a recent graduate of Bell's accounting program, evaluated the operating performance of Carla Vista Company's six divisions. Sharon made the following presentation to Carla Vista'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 $25,300."

 

The Other
Five Divisions

Percy
Division

Total

Sales

$1,663,000

$100,900

$1,763,900

Cost of goods sold

978,400

76,500

1,054,900

Gross profit

684,600

24,400

709,000

Operating expenses

528,500

49,700

578,200

Net income

$156,100

$ (25,300

$130,800

In the Percy Division, cost of goods sold is $60,100 variable and $16,400 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.

Required - Is Sharon right about eliminating the Percy Division? Prepare a schedule to support your answer.

Reference no: EM133114218

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