The operations of Smits Corporation are divided into the Child Division and the Jackson Division. Projections for the next year are as follows: Child Division Jackson Division Total Sales revenue $250,000 $180,000 $430,000 Variable expenses 90,000 100,000 190,000 Contribution margin $160,000 $80,000 $240,000 Direct fixed expenses 75,000 62,500 137,500 Segment margin $85,000 $17,500 $102,500 Allocated common costs 35,000 27,500 62,500 Total relevant benefit (loss) $50,000 $(10,000) $40,000 Operating income for Smits Corporation as a whole if the Jackson Division were dropped would be a.$50,000. b.$40,000. c.$60,000. d.$22,500.
The operations of Smits Corporation are divided into the Child Division and the Jackson Division. Projections for the next year are as follows: Child Division Jackson Division Total Sales revenue $250,000 $180,000 $430,000 Variable expenses 90,000 100,000 190,000 Contribution margin $160,000 $80,000 $240,000 Direct fixed expenses 75,000 62,500 137,500 Segment margin $85,000 $17,500 $102,500 Allocated common costs 35,000 27,500 62,500 Total relevant benefit (loss) $50,000 $(10,000) $40,000 Operating income for Smits Corporation as a whole if the Jackson Division were dropped would be a.$50,000. b.$40,000. c.$60,000. d.$22,500.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The operations of Smits Corporation are divided into the Child Division and the Jackson Division. Projections for the next year are as follows:
Operating income for Smits Corporation as a whole if the Jackson Division were dropped would be
| Child Division |
Jackson Division |
Total |
||||
| Sales revenue | $250,000 | $180,000 | $430,000 | |||
| Variable expenses | 90,000 | 100,000 | 190,000 | |||
| Contribution margin | $160,000 | $80,000 | $240,000 | |||
| Direct fixed expenses | 75,000 | 62,500 | 137,500 | |||
| Segment margin | $85,000 | $17,500 | $102,500 | |||
| Allocated common costs | 35,000 | 27,500 | 62,500 | |||
| Total relevant benefit (loss) | $50,000 | $(10,000) | $40,000 |
Operating income for Smits Corporation as a whole if the Jackson Division were dropped would be
a.$50,000.
b.$40,000.
c.$60,000.
d.$22,500.
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