is judy right about eliminating the ketchum division prepare a schedule to support y 591852

Judy Herzog, a recent graduate of Rolling’s accounting program, evaluated the operating performance of Klumpe Company’s six divisions. Judy made the following presentation to the Klumpe board of directors and suggested the Ketchum Division be eliminated. “If the Ketchum Division is eliminated,” she said, “our total profits would increase by $16,870.”

	The Other	Ketchum
	Five Divisions	Division	Total
Sales	$1,664,200	$ 98,200	$1,762,400
Cost of goods sold	978,520	76,470	1,054,990
Gross profit	685,680	21,730	707,410
Operating expenses	527,940	38,600	566,540
Net income	$ 157,740	$(16,870)	$ 140,870

In the Ketchum Division, cost of goods sold is $56,000 variable and $20,470 fixed, and operating expenses are $12,000 variable and $26,600 fixed. None of the Ketchum Division’s fixed costs will be eliminated if the division is discontinued.

Instructions

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