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 $26,100." The Other Five Divisions Percy Division Total
Sales $1,663,000 $100,400 $1,763,400
Cost of goods sold 977,000 76,200 1,053,200
Gross profit 686,000 24,200 710,200
Operating expenses 528,400 49,900 578,300
Net income $157,600 $ (25,700) $131,900
In the Percy Division, cost of goods sold is $59,100 variable and $17,100 fixed, and operating expenses are $30,500 variable and $19,400 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.