Question

The Kelsh Company has two divisions--North and South. The divisions have the following revenues and expenses:

Answer 1

Answer:

c. (140,000)

Explanation:

Effect on net income of dropping the North Division:

Sales                                       $(900,000)

Variable expenses                 $450,000

Contribution margin               $(450,000)

Traceable fixed expenses     $260,000

Effect on net income            ($190,000)

Since the North Division currently have Net operating income (loss) of ($50,000), so therefore, after dropping the North Division, the overall company net operating loss will be $140,000 ($50,000 - $190,000).