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 expense 240,000 190,000 Net operating income (loss) ... $ (50,000) $ 100,000 Management at Kelsh is pondering the elimination of North Division. If North Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given these data, the elimination of North Division would result in an overall company net operating income of:

Question

Business

Andrew Russell

4 January, 16:26

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 expense 240,000 190,000 Net operating income (loss) ... $ (50,000) $ 100,000 Management at Kelsh is pondering the elimination of North Division. If North Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given these data, the elimination of North Division would result in an overall company net operating income of:

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Gunner · Answer 1

-$140,000

Explanation:

The calculation of effect on net operating income of north division is shown below:-

Effect on net operating income of north division = - Sales + Variable expenses + Traceable fixed expenses

= - $900,000 + $450,000 + $260,000

= - $190,000

And it is given that the current net operating income of north division is $50,000 which is taken from

= $100,000 - $50,000

= $50,000

So based on this, the net operating loss is

= - $190,000 + $50,000

= - $140,000