X Corporation has two divisions – South and North. The divisions have the follow
ID: 2465065 • Letter: X
Question
X Corporation has two divisions – South and North. The divisions have the following revenues and expenses:
South North
Sales $450,000 $470,000
Variable Expenses $150,000 $225,000
Traceable Fixed Expenses $105,000 $130,000
Allocated Common Corporate Expenses $95,000 $120,000
Net Operating Income (Loss) $100,000 ($5,000)
Management at X company is pondering the elimination of the North Division. The Traceable fixed expenses of North Division include $15,000 of depreciation expense. Given these data, the elimination of North Division would result in an overall company net operating income of:
(20,000)
(35,000)
$85,000
$100,000
Explanation / Answer
Solution-
There is no clarification about avoidable cost.So need to take few assumption-
1st-Traceable Fixed Expenses could be avoided except depreciation which could not be avoided.
2nd-Allocated Common Corporate Expenses could not be avoided.
Answer would be "B"
S N Sales $ 450,000.00 Variable Exp. $ 150,000.00 Contribution $ 300,000.00 $ - $ 300,000.00 Traceble fixed Exp. $ 105,000.00 $ 15,000.00 $ 120,000.00 Allocated exp. $ 95,000.00 $ 120,000.00 $ 215,000.00 Net operating income $ (35,000.00)Related Questions
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