New accountant recommendation

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Reference no: EM13137862

A recent accounting graduate evaluated the operating performance of Fane Company's three divisions. The following presentation was made to Fane's Board of Directors. During the presentation, the accountant made the recommendation to eliminate the Southern Division, stating that total net income would increase by $20,000 as shown in the analysis below.

Cost of goods sold is 75% variable and operating expenses are 70% variable. If the division is eliminated, 40% of the fixed costs will be eliminated.

Instructions:

Do you concur with the new accountant's recommendation? Present a schedule to support your answer.

Reference no: EM13137862

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