Sara Casper, a recent graduate of Rolling€™s accounting program, evaluated the operating performance of Klumpe Company€™s six divisions. Sara made the following presentation to the Klumpe board of directors and suggested the Western Division be eliminated. €œIf the Western Division is eliminated,€ she said, €œour total profits would increase by $16,870.€

In the Western 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 Western Division€™s fixed costs will be eliminated if the division is discontinued.

Instructions
Is Sara right about eliminating the Western Division? Prepare a schedule to support youranswer.

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