Question

The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses: East West Sales $ 595,000 $ 445,500 Variable costs 180,000 236,500 Traceable fixed costs 144,000 203,400 Allocated common corporate costs 129,600 187,000 Net operating income (loss) $ 141,400 $ (181,400 ) The management of Cook is considering the elimination of the West Division. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Given these data, the elimination of the West Division would result in an overall company net operating income (loss) of:

Answer 1

The Cook Corporation

Given these data, the elimination of the West Division would result in an overall company net operating loss of:

$45,600.

Step-by-step explanation:

a) Data and Calculations:

Income Statement of the Group before Elimination of West Division:

East West Total

Sales $ 595,000 $ 445,500 $ 1,040,500

Variable costs 180,000 236,500 416,500

Traceable fixed costs 144,000 203,400 347,400

Allocated common corporate costs 129,600 187,000 316,600

Net operating income (loss) $ 141,400 $ (181,400) $ (40,000)

Income Statement of the Group after Elimination of West Division:

East

Sales $ 595,000

Variable costs 180,000

Traceable fixed costs 144,000

Allocated common corporate costs 316,600

Net operating income (loss) $ (45,600)