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A Recent Accounting Graduate from Marvel State University Evaluated the Operating

Question 153

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A recent accounting graduate from Marvel State University evaluated the operating perform-ance of Fanning Company's four divisions. The following presentation was made to Fanning's Board of Directors. During the presentation, the accountant made the recommendation to eliminate the Southern Division stating that total net income would increase by $60,000. (See analysis below.) A recent accounting graduate from Marvel State University evaluated the operating perform-ance of Fanning Company's four divisions. The following presentation was made to Fanning's Board of Directors. During the presentation, the accountant made the recommendation to eliminate the Southern Division stating that total net income would increase by $60,000. (See analysis below.) For the other divisions, cost of goods sold is 80% variable and operating expenses are 70% variable. The cost of goods sold for the Southern Division is 35% fixed, and its operating expenses are 75% fixed. If the division is eliminated, only $10,000 of the fixed operating costs will be eliminated. Instructions Do you concur with the new accountant's recommendation? Present a schedule to support your answer.
For the other divisions, cost of goods sold is 80% variable and operating expenses are 70% variable. The cost of goods sold for the Southern Division is 35% fixed, and its operating expenses are 75% fixed. If the division is eliminated, only $10,000 of the fixed operating costs will be eliminated.
Instructions
Do you concur with the new accountant's recommendation? Present a schedule to support your answer.

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