He Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses:

East West

Sales $ 585,000 $ 473,000

Variable costs 174,000 228,300

Traceable fixed costs 145,500 207,000

Allocated common corporate costs 131,000 176,800

Net operating income (loss) $ 134,500 $ (139,100)

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:

A. $134,500B. $ (42,300) C. $ (139,100) D. $ (4,600)

Question

Business

Ulises Sosa

28 June, 11:49

He Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses:

East West

Sales $ 585,000 $ 473,000

Variable costs 174,000 228,300

Traceable fixed costs 145,500 207,000

Allocated common corporate costs 131,000 176,800

Net operating income (loss) $ 134,500 $ (139,100)

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:

A. $134,500B. $ (42,300) C. $ (139,100) D. $ (4,600)

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Answers (1)

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Steve Mcbride · Answer 1

The elimination of the West Division would result in an overall company net operating loss of - $42,300

Explanation:

In order to calculate what would of the net operating income of the company is of the management of cook consider to eliminate the west division, we would have to make the following calculation:

Net income if Discontinue=Sales-variable cost-Trecable fixed expense - Allocated common corporate cost

=$ 585,000 - $174,000-$145,500-$307,800

=-$42,300

The elimination of the West Division would result in an overall company net operating loss of - $42,300