Question

The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses: East West Sales $ 602,000 $ 505,000 Variable costs 230,000 299,000 Traceable fixed costs 150,500 191,000 Allocated common corporate costs 127,600 155,000 Net operating income (loss) $ 93,900 $ (140,000) 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:

Answer 1

Net operating loss = $61,100

Step-by-step explanation:

Particulars East division (a) West division (b) Total

Sales $602,000 $0 $602,000

Less Costs

Variable costs -$230,000 $0 -$230,000

Traceable fixed costs -$150,500 $0 -$150,500

Allocated corporate costs -$127,600 -$155,000 -$282,600

Net income (loss) $93,900 -$155,000 -$61,100