Answer:
Income Statement Total
Total Net Sales $ 335,000
Variable Cost -$ 109,000
Operating Income $ 226,000
Direct Fixed Costs -$ 176,000
Income Before Tax Expenses $ 50,000
Allocated Common Cost -$ 92,500
Net Income -$ 42,500
Step-by-step explanation:
When the Blur Division it's dropped the company has a worst operating income because of the fixed costs and the common costs.
The common cost are those that can't be allocated only to one segment of the business, for example, the cost of rent for a production facility, it's a cost that can´t allocated just to one product line, but if you close one line of business the all costs goes to the segment business remaining.
With fixed costs it's the same situation, when you have more than one product line, the total cost are share by all the products line but if you drop one , the fixed costs are share between less products but the same value.
The situation it's a worst operating income that if the Blur Division keep operating.
WITH BLUR OPERATIONS
Income Statement Blink Blur Total
Total Net Sales $ 335,000 $ 189,000 $ 524,000
Variable Cost -$ 109,000 -$ 88,000 -$ 197,000
Operating Income $ 226,000 $ 101,000 $ 327,000
Direct Fixed Costs -$ 95,000 -$ 81,000 -$ 176,000
Income Before Tax Expenses $ 131,000 $ 20,000 $ 151,000
Allocated Common Cost -$ 50,000 -$ 42,500 -$ 92,500
Net Income $ 81,000 -$ 22,500 $ 58,500
WITHOUT BLUR OPERATIONS.
Income Statement Blink Blur Total
Total Net Sales $ 335,000 $ 0,000 $ 335,000
Variable Cost -$ 109,000 $ 0,000 -$ 109,000
Operating Income $ 226,000 $ 0,000 $ 226,000
Direct Fixed Costs -$ 95,000 -$ 81,000 -$ 176,000
Income Before Tax Expenses $ 131,000 -$ 81,000 $ 50,000
Allocated Common Cost -$ 50,000 -$ 42,500 -$ 92,500
Net Income $ 81,000 -$ 123,500 -$ 42,500