Gaby Rodriquez, a recent graduate of State??s accounting program, evaluated the operating performance of Schultz Company??s six divisions. Gaby made the following presentation to the Schultz board of directors and suggested the Ketchum Division be eliminated. ??If the Ketchum Division is eliminated,?? she said, ??our total profits would increase by $16,870.??

In the Ketchum Division, cost of goods sold is $56,000 variable and $20,470 fixed, and operating expenses are $12,000 variable and $26,600 fixed. None of the Ketchum Division??s fixed costs will be eliminated if the division is discontinued.InstructionsIs Gaby right about eliminating the Ketchum Division? Prepare a schedule to support youranswer.

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The Other Five Divisions Ketchum Division $ 98,200 76,470 21,730 38,600 Total Sales Cost of goods sold Gross profit Operating expenses Net income $1,762,400 1,054,990 707,410 $1,664,200 978,520 685,680 527,940 $ 157,740 566,540 S(16,870) $ 140,870