Question

The operations of Winston Corporation are divided into the Blink Division and the Blur Division. Projections for the next year are as follows: Blink Division Blur Division Total Sales $ 380,000 $ 198,000 $ 578,000 Variable costs 118,000 97,000 215,000 Contribution margin $ 262,000 $ 101,000 $ 363,000 Direct fixed costs 104,000 90,000 194,000 Segment margin $ 158,000 $ 11,000 $ 169,000 Allocated common costs 59,000 51,500 110,500 Operating income (loss) $ 99,000 $ (40,500 ) $ 58,500 If the Blur Division were dropped, Blink Division's sales would increase by 30%. If this happened, the operating income for Winston Corporation as a whole would be:

Answer 1

$126,100

Step-by-step explanation:

Operating income is computed as;

= [Contribution margin of Blink division × increase sales percentage] - fixed costs of Blink division - Allocated common costs of Blink division - Allocated common costs of Blur division

= [$262,000 × 130%] - $104,000 - $59,000 - $51,500

= $340,600 - $104,000 - $59,000 - $51,500

= $126,100