Amarina Walker, a recent graduate of Queensland’s accounting program, evaluated the operating performance of Nguyen Ltd.’s six divisions. Amarina made the following presentation to Nguyen’s board of directors and suggested the Brisbane Division be eliminated. “If the Brisbane Division is eliminated,” she said, “our total profi ts would increase by €26,000.”

In the Brisbane Division, cost of goods sold is €61,000 variable and €15,000 fixed, and operating expenses are €30,000 variable and €20,000 fixed. None of the Brisbane Division’s fixed costs will be eliminated if the division is discontinued. 

Instructions

Is Amarina right about eliminating the Brisbane Division? Prepare a schedule to support your answer.

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Brisbane The Other Five Divisions Division Total Sales Cost of goods sold Gross profit Operating expenses Net income €1,664,200 €100,000 76,000 €1,764,200 1,054,520 978,520 685,680 527,940 € 157,740 24,000 50,000 € (26,000) 709,680 577,940 € 131,740