The Kelsh Company has two divisions--North and South. The divisions have the fol

Question

The Kelsh Company has two divisions--North and South. The divisions have the following revenues and expenses:

242,000    

192,000   

$(53,000)   

$104,000   

    
Management at Kelsh is pondering the elimination of North Division. If North Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given these data, the elimination of North Division would result in an overall company net operating income (loss) of:

$157,000

$51,000

$(138,000)

$104,000

North South   Sales $920,000     $822,000      Variable expenses 459,000     306,000      Traceable fixed expenses 272,000     220,000      Allocated common corporate expenses

242,000    

192,000   

  Net operating income (loss)

$(53,000)   

$104,000   

Explanation / Answer

Net Operating Income South $      104,000 Common Expenses (North) $    (242,000) Net Income $    (138,000)

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