Question

MC Qu. 123 Fallow Corporation has... Fallow Corporation has two separate profit centers. The following information is available for the most recent year: West Division East Division Sales (net) $450,000 $600,000 Salary expense 51,000 65,000 Cost of goods sold 155,000 275,000 The West Division occupies 11,250 square feet in the plant. The East Division occupies 6,750 square feet. Rent, which was $ 90,000 for the year, is an indirect expense and is allocated based on square footage. Compute operating income for the West Division.

Answer 1

Answer:

$187,750

Explanation:

Computation for operating income for the West Division.

OPERATING INCOME FOR THE WEST DIVISION

Sales $450,000

Less Cost of goods sold ($155,000)

Gross profit $295,000

($450,000-155,000)

Less: Salary Expense ($51,000)

Allocated rent ($56,250)

($90,000 * 11250/18,000)

West Division income $187,750

Total area of both division = 11,250 + 6,750 = 18,000 square feet

Therefore operating income for the West Division is $187,750