Question

The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses: East West Sales $ 550,000 $ 489,500 Variable costs 198,000 258,500 Traceable fixed costs 169,500 194,400 Allocated common corporate costs 117,500 141,100 Net operating income (loss) $ 65,000 $ (104,500 ) The management of Cook is considering the elimination of the West Division. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Given these data, the elimination of the West Division would result in an overall company net operating income (loss) of:

Answer 1

Answer:

$76,100 net operating loss

Explanation:

The computation of the overall company net operating income (loss) is shown below:

= East sales - east Variable costs - east Traceable fixed costs  - east Allocated common corporate costs - west Allocated common corporate costs

= $550,000 - $198,000 - $169,500 - $117,500 - $141,100

= -$76,100 loss

Since the west division is eliminated so all the items would be ignored except Allocated common corporate costs

Answer 2

The  elimination of the West Division would result in an overall company net operating income (loss) of: ($76,100).

Net operating income

Sales $550,000

Less Variable cost $198,000

Less  Traceable fixed costs $169,500

Less Common fixed cost $258,600

 ($117,500+ $141,100)

Net operating income ($76,100)

Inconclusion the  elimination of the West Division would result in an overall company net operating income (loss) of: ($76,100).

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