Dental Imported From Edge Final Exam Saved Help Benson Transport Company divides

Question

Dental Imported From Edge Final Exam Saved Help Benson Transport Company divides its operations into four divisions. A recent income statement for its West Division follows: 2 BENSON TRANSPORT COMPANY West Division Income Statement for the Year 2019 Revenue $530,8ee Salaries for drivers Fuel expenses Insurance Division-level facility-sustaining costs Companywide facility-sustaining costs (380,800) (53,000) (73,008) (43,000) (133,000) $ (152,000) 8 points Net loss 02:59:05 Required eBook a. By how much would companywide income increase or decrease if West Division is eliminated? Should West Division be eliminated? b. Assume that West Division is able to increase its revenue to $580,000 by raising its prices. Determine the amount of the increase or decrease that would occur in companywide net income. Should West Division be eliminated if revenue were $580,000? c. What is the minimum amount of revenue required to justify continuing the operation of West Division? Complete this question by entering your answers in the tabs below. Required A Required B Required C ed? Should West Division be By how much would companywide Income increase or decrease if eliminated? West Division is eliminat Income would by Should West Division be eliminated? Required A Required B> Mc Graw Hill

Explanation / Answer

a) * Income would increase by $ 152000.

( by eliminating the loss generating division, the total company wide income would raise with an amount equal to loss incurred by the eliminating division.

For example:- If incomes/ losses generated by 4 divisions as follows,

1st division 10000 loss,

2nd division 10000 profit,

3rd division 10000 profit and

4th division 10000 profit

Company wide profit = (-10000 + 10000+10000+10000) = 20000

If first division was eliminated then company wide profit = ( 10000 + 10000 + 10000 ) = 30,000

Here the increase in company wide income raised up to the loss incurred by eliminated division)

* Its better to eliminate west division.

( Because it is generating heavy losses)

b) * company wide net income would increase by $50,000

( Because the difference of $ 520,000 and $ 580,000 is $ 50,000 increase which has a net effect on the total company wide net income)

* Its better to eliminate the west division

( Because eventhough its revenue is increased but it is not enough to meet its costs. After raising its revenue to $ 580000 its net loss is $ 102000.)

c) * Minimum amount of revenue need is $ 152,000.

( Because the minimum amount required is the amount needed to meet all the expenses incurred by the westdivision. That is no profit and no loss position where the revenue, equal to the costs incurred if generated, its better to continue. Atleast without expecting any profit.)

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