Question

Product (Segment) elimination decision. The Kelsh Company has two divisions--North and South. The divisions have the following revenues and expenses: North South Sales $900,000 $800,000 Variable expenses 450,000 300,000 Traceable fixed expenses 260,000 210,000 Allocated common corporate expenses 240,000 190,000 Net operating income (loss) ($50,000) $100,000 Management at Kelsh is pondering the elimination of the North Division. If the North Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given this data, the elimination of the North Division would result in an overall company operating income of:

Answer 1

Net operating income (loss) $ (140,000)

Step-by-step explanation:

The Kelsh Company

North South

Sales $900,000 $800,000

Variable expenses 450,000 300,000

Traceable fixed expenses 260,000 210,000

Allocated common corporate expenses 240,000 190,000

Net operating income (loss) ($50,000) $100,000

Given this data, the elimination of the North Division would result in an overall company operating income of:$ (140,000)

As the total common corporate expenses would be unaffected there fore they would be added in the income statement of the South Division alone.

The Kelsh Company

South

Sales $800,000

Variable expenses 300,000

Traceable fixed expenses 210,000

Allocated common corporate expenses 240,000

190,000

Net operating income (loss) $ (140,000)