Question

The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses: East West Sales $ 595,000 $ 467,500 Variable costs 216,000 266,800 Traceable fixed costs 156,000 187,200 Allocated common corporate costs 128,300 192,100 Net operating income (loss) $ 94,700 $ (178,600 ) 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:

Answer 1

Answer:

($97,400)

Explanation:

The computation of net operating income (loss) is shown below:-

                                                   East                West

Sales                                                $595,000         0

Less: Variable Cost                         $216,000         0

Less: Traceable Fixed Cost            $156,000         0

Less: Allocated common                

corporate cost                                    $320,400

= $128,300 + $192,100                                             0

Net operating Income(loss)              ($97,400)     0

As per the given question it is mentioned that company have net operating income from East division = $94,700