Judy Jean, a recent graduate of Rolling’s accounting program, evaluated the operating performance of Artie Company’s six divisions. Judy made the following presentation to Artie’s board of directors and suggested the Huron Division be eliminated. “If the Huron Division is eliminated,” she said, “our total profits would increase by $26,080.”

The Other Five Divisions Huron
Division Total
Sales $1,663,170 $100,920 $1,764,090
Cost of goods sold 978,350 76,690 1,055,040
Gross profit 684,820 24,230 709,050
Operating expenses 527,830 50,310 578,140
Net income $156,990 $ (26,080) $130,910

In the Huron Division, cost of goods sold is $59,500 variable and $17,190 fixed, and operating expenses are $24,100 variable and $26,210 fixed. None of the Huron Division’s fixed costs will be eliminated if the division is discontinued.

Is Judy right about eliminating the Huron Division? Prepare a schedule to support your answer. 

Continue Eliminate Net Income
Increase
(Decrease)
Sales $ $ $
Variable costs
Cost of goods sold
Operating expenses
Total variable
Contribution margin
Fixed costs
Cost of goods sold
Operating expenses
Total fixed
Net income (loss) $ $ $

Answer rating: 100% (QA)

To determine whether eliminating the Huron Division is the right decision lets prepare a schedule co... View the full answer