A Recent Accounting Graduate from East Southwest State University Evaluated

Essay

A recent accounting graduate from East Southwest State University evaluated the operating performance of Patel Company's four divisions. The following presentation was made to Patel 's Board of Directors. During the presentation the accountant made the recommendation to eliminate the Northern Division stating that total net income would increase by $60000. (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 Northern Division is 35% fixed and its operating expenses are 75% fixed. If the division is eliminated only $5000 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.