Question

The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses: East WestSales $ 575,000 $ 507,000 Variable costs 168,000 301,000 Traceable fixed costs 165,000 193,000 Allocated common corporate costs 128,300 157,000 Net operating income (loss) $ 113,700 $ (144,000 )

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:Multiple ChoiceA. $113,700B. $(43,300)C. $(144,000)D. $(30,300)

Answer 1

Option (B) is correct.

Step-by-step explanation:

Net operating income (loss):

= Sales - Variable costs - Traceable fixed costs - Total common corporate costs

= $575,000 - $168,000 - $165,000 - ($128,300 + $157,000)

= $575,000 - $168,000 - $165,000 - $285,300

= ($43,300)

Elimination of the West Division would result in an overall company net operating income (loss) of $(43300).