The Kelsh Company has two divisions--North and South. The divisions have the fol

Question

The Kelsh Company has two divisions--North and South. The divisions have the following revenues and expenses: North South Sales $1,050,000 $965,000 Variable expenses 517,500 345,000 Traceable fixed expenses 350,000 285,000 Allocated common corporate expenses 255,000 205,000 Net operating income (loss) $(72,500) $130,000 Management at Kelsh is pondering the elimination of North Division. If North Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given these data, the elimination of North Division would result in an overall company net operating income (loss) of: $130,000 $202,500 $(125,000) $57,500

Explanation / Answer

Eliminating the North division will eliminate the North sales, north variable expenses, and North traceable fixed expenses which leaves you with:

965000-345000-285000-255000-205000 which results in a net loss of $125000

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