Question

CALCULATOR PRINTER VERSION 4 BACK NEXT Exercise 199 (Part Level Submission) A recent accounting graduate from Marvel State University evaluated the operating performance 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.) Southern Division Total Sales Cost of Goods Sold Gross Profit Operating Expenses Net Income Divisions $ 2,000,000 950,000 1,050,000 800,000 $ 250,000 $ 480,000 400,000 80,000 140,000 $(60,000) $ 2,480,000 1,350,000 1,130,000 940,000 $ 190,000 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 30% fixed, and its operating expenses are 757 fixed. If the division is eliminated, only $15,000 of the fixed operating costs will be eliminated. (a) Your answer is partially correct. Try again. Prepare the analysis for new accountant's recommendation (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). Do not leave any field blank. Enter o for the amounts.) Continue Eliminate Net Income Increase (Decrease) 480,000 (480,000) vacy Pollsx 2000-2019 John Wiley & Sons, Inc. All Rights Reserved. A Division of lohn Wiley & Sons, Inc. Version 4.24.16.2 Kisx Show All X MacBook Air

Answer 1

not sure if you have to put cost also in negative sign or not.. I have used positive sign for cost..

		Continue		Eliminate		Net income increase/(Decrease)
Sales		480000		0		-480000
Variable cost
Cost of goods sold	400000*80%	320000		0		-320000
operating expenes	140000*70%	98000		0		-98000
Total variable cost		418000		0		-418000
contribution margin		62000		0		-62000
fixed cost
Cost of goods sold	400000*20%	80000		80000		0
operating expenes	140000*30%	42000		27000		-15000
Net profit / (loss)		-60000		-107000		-47000