Reining Tow th Question 2 Kaveed, a recent graduate of an accounting program, evoketed the opening perfoone of Lutar Campeny's four divisions Karin Ahmedae the town presentation to the Lunar bead at drectors and suggested the Re Division be eliminated the ita Division is orinated she set. "our satal arts would incase by 120.000 The Other Four Rit Divisi Divisie Sale $1.800.000 $110,000 Coat of goods sold $50,000 1.000 Groes prof 850,000 30,000 Operating pers 500,000 50,000 Net Income $150.000 in the Rife Oision, cost of goods scad is 6000 venable and $15.000 ad and operating expermane cols will be sinated if the division is disced (1) Pp an rental analyse to ninge or kap a divisen desi Is Nam Ahmed sigre about eliminating the Pre Dision? Why or why not? (13 BIVG Pagan xx 1064 THOOR 2- T. x D Q al 8 points Karim Ahmed, a recent graduate of an accounting program, evaluated the operating performance of Lunar Company's four divisions. Karim Ahmed made the following presentation to the Lunar board of directors and suggested the Riffa Division be eliminated. "If the Riffa Division is eliminated," she said, "our total profits would increase by "$20,000" The Other Four Riffa Divisions Division Sales $1,600,000 $110,000 Cost of goods sold 950,000 80,000 Gross profit 650,000 30,000 Operating expenses Net income 500,000 50,000 $150,000 ($20,000) In the Riffa Division, cost of goods sold is $65,000 variable and $15,000 fixed, and operating expenses are $40,000 variable and $10,000 fixed. None of the Riffa Division's fixed costs will be eliminated if the division is discontinued. Required: (1) Prepare an incremental analysis to eliminate or keep a division decision. (marks) (2) Is Karim Ahmed right about eliminating the Riffa Division? Why or why not? (1.5 marks)