Question

The operations of Bridgeton Corporation are divided into the Adams Division and the Carter Division. Projections for the next year are as follows: Adams Division Carter Division Total Sales $ 560,000 $ 336,000 $ 896,000 Variable costs 196,000 154,000 350,000 Contribution margin $ 364,000 $ 182,000 $ 546,000 Direct fixed costs 168,000 140,000 308,000 Segment margin $ 196,000 $ 42,000 $ 238,000 Allocated common costs 84,000 63,000 147,000 Operating income (loss) $ 112,000 $ (21,000 ) $ 91,000 Operating income for Bridgeton Corporation as a whole if the Carter Division were dropped would be:

Answer 1

$49,000

Step-by-step explanation:

Operating Income = Sales - Variable Cost - Direct Fixed cost - Common Unavoidable Cost

Operating Income = $560,000 - $196,000 - $168,000 - ($84,000+$63,000)

Operating Income = $560,000 - $196,000 - $168,000 - $147,000

Operating Income = $49,000

​Therefore, the operating income for Bridgeton Corporation when Carter Division was dropped is $49,000.