Reference no: EM132659442

Mary Claire, a CPA and recent graduate of SPSBL's accountancy program, evaluated the operating performance of Alegro Company's six divisions. Mary Claire made the following presentation to Alegro's Board of Directors and suggested the Catbalogan Division be eliminated. "If the Catbalogan Division is eliminated," she said, "our total profits would increase by P24,500."

	The other Five Divisions	Catbalogan Division	Total
Sales	1,664,200	100,000	1,764,200
Cost of goods sold	978,520	76,500	1,055,020
Gross profit	685,680	23,500	709,180
Operating expenses	527,940	48,000	575,940
Net income	157,740	(24,500)	133,240

In the Catbalogan Division, cost of goods sold is P60,000 variable and P16,500 fixed, and operating expenses are P25,000 variable and P23,000 fixed. None of the Catbalogan Division's fixed costs will be eliminated if the division is discontinued.

Instructions:

Question 1: Is Mary Claire right about eliminating the Catbalogan Division? Make a schedule to support the answer.