If sales for Division F increase $40,000 with a $10,000 increase in the Division

Question

If sales for Division F increase $40,000 with a $10,000 increase in the Division's traceable fixed costs, the overall company net operating income should:
A. increase by $30,000
B. increase by $6,000
C. increase by $2,889
D. decrease by $4,000

Total Division F Division L $40,000 $220,000 $180.000 204000 132.000 72.0MIO 108,M00 Sales Variahle expenses. Contribution margin.1%,000 Traceable fixed expense.12.000550 .00 Segment margin 69,000 3,016,H0 Common fixed expense Net operating incoime 88,000 69,000 $33,00036,000

Explanation / Answer

If sales for Division F increase $40,000 then contribution margin =40,000*40%=16,000- a $10,000 increase in the Division's traceable fixed costs=increases by $6,000 net operating income.

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