Question

Gunderman Corporation has two divisions: the Alpha Division and the Charlie Division. The Alpha Division has sales of $260,000, variable expenses of $140,100, and traceable fixed expenses of $66,300. The Charlie Division has sales of $570,000, variable expenses of $319,800, and traceable fixed expenses of $125,500. The total amount of common fixed expenses not traceable to the individual divisions is $125,200. What is the company's net operating income?

Answer 1

Answer:

$53,100

Explanation:

Both sales and variable cost are dependent on the number of units sold.

The sales less the variable cost gives the contribution margin. The contribution margin less the fixed cost gives the net operating income.

As such, the net operating income/loss is the difference between the sales and the total costs

As such,  the company's net operating income

= $260,000 - $140,100 - $66,300 + $570,000 - $319,800 - $125,500 -  $125,200

= $53,100