Question

The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses:__________. East West Sales $ 570,000 $ 478,500 Variable costs 238,000 327,300 Traceable fixed costs 172,500 147,600 Allocated common corporate costs 128,300 163,200 Net operating income (loss) $ 31,200 $ (159,600 ) The management of Cook is considering the elimination of the West Division. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Given these data, the elimination of the West Division would result in an overall company net operating income (loss) of:________.a. $31,200 b. $(132,000) c. $(159,600) d. $(128,400)

Answer 1

Answer:

b. $(132,000)

Explanation:

                                                                 west

Sales                                                       478500        

less: variable costs                                327300

Contribution margin                               151200

less: Traceable fixed costs                    147600

Effect on net operating income               3600

company present net operating

loss is   (-159600 + 31200)                  -128400      

less: Dropping the west Division

would reduce net operating

income by                                                 3600

The overall company net

operating loss would be                     -132000