If the company eliminates the Western Division and the Eastern Division sales increase by 10% as a result, how much will the company’s net operating income decrease?
If the company eliminates the Western Division and the Eastern Division sales increase by 10% as a result, how much will the company’s net operating income decrease?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Chao, Incorporated, a service provider, has two divisions. The firm’s most recent annual contribution format segmented income statement appears below.
| Total Company | Eastern Division | Western Division | |
|---|---|---|---|
| Sales | $ 450,000 | $ 90,000 | $ 360,000 |
| Variable expenses | 243,000 | 27,000 | 216,000 |
| Contribution margin | 207,000 | 63,000 | 144,000 |
| Traceable fixed expenses | 100,800 | 46,800 | 54,000 |
| Division segment margin | 106,200 | $ 16,200 | $ 90,000 |
| Common fixed expenses | 72,000 | ||
| Net operating income | $ 34,200 |
If the company eliminates the Western Division and the Eastern Division sales increase by 10% as a result, how much will the company’s net operating income decrease?
multiple choice
-
$83,700
-
$88,380
-
$90,000
-
$137,700
-
$144,000
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