Question

Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period: Total Company Southern Division Northern Division Sales $ 418,000 $ 193,000 $ 225,000 Variable expenses $ 130,880 $ 79,130 $ 51,750 Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000 Common fixed expense $ 79,420 $ 36,670 $ 42,750 The common fixed expenses have been allocated to the divisions on the basis of sales. What is the company's overall net operating income if it operates at the break-even points for its two divisions?

Answer 1

The company's overall net operating income, if it operates at the break-even points for its two divisions, is $21,700.

Step-by-step explanation:

To calculate the company's overall net operating income, we need to subtract the total variable expenses and traceable fixed expenses from the total sales. We can then subtract the common fixed expenses to get the overall net operating income.

Overall Net Operating Income = Total Sales - Total Variable Expenses - Traceable Fixed Expenses - Common Fixed Expenses

Substituting the given values into the formula:

Overall Net Operating Income = $418,000 - $130,880 - $186,000 - $79,420

Calculating the equation:

Overall Net Operating Income = $21,700

Answer 2

Neelon Corporation

Total Company Southern Northern

Division Division

Sales $ 418,000 $ 193,000 $ 225,000

Variable expenses $ 130,880 $ 79,130 $ 51,750

Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000

Common fixed expense $ 79,420 $ 36,670 $ 42,750

Net operating income $ 21,700 $200 $21,500

Step-by-step explanation:

a) Data and Calculations:

Total Company Southern Northern

Division Division

Sales $ 418,000 $ 193,000 $ 225,000

Variable expenses $ 130,880 $ 79,130 $ 51,750

Traceable fixed expenses $ 186,000 $ 77,000 $ 109,000

Common fixed expense $ 79,420 $ 36,670 $ 42,750

Net operating income $ 21,700 $200 $21,500

Neelon Corporation reaches break-even point when it will make no profit or loss. This implies that its break-even point is reached when sales revenue equals both variable and fixed costs. The excess that Neelon Corporation generates from sales revenue over total costs is regarded as operating income.