East West Sales Variable costs Traceable fixed costs Allocated common corporate

Question

East West Sales Variable costs Traceable fixed costs Allocated common corporate costs 117,50o 141,100 Net operating income (loss) $65,000 $(104,500) $550,000 $489.500 198,000 258,500 169,500 194,400 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, prepare a schedule showing the result of eliminating the West Division. In your analysis, be sure to compute the effect on net operating income (loss). Indicate operating income with the west division and without. HTML Editor

Explanation / Answer

# the allocated corporate fixed cost will now be allocated to east divsion in the absence of west division

The allocated corporate fixed cost is unavoidable. Hence it should be regarded as irrelevant cost while assessing the

profitability of east and west divsion.

When west is not eliminated When west is eliminated East west East sale 550000 489500 sale 550000 variable cost 198000 258500 variable cost 198000 Traceable fixed cost 169500 194400 Traceable fixed cost 169500 allocated common corporate cost 117500 141100 allocated common corporate cost 258500 # Net operating income 65000 -104500 Net operating income -76000

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.