Vanikord Corporation currently has two divisions which had the following operating results for last year: Because the Rubber Division sustained a loss,the president of Vanikoro is considering the elimination of this division.All of the division's traceable fixed costs could be avoided if the division was dropped.None of the allocated common corporate fixed costs could be avoided.If the Rubber Division was dropped at the beginning of last year,how much higher or lower would Vanikoro's total net operating income have been for the year?
A)$20,000 higher
B)$50,000 higher
C)$50,000 lower
D)$30,000 lower

Question

Vanikord Corporation currently has two divisions which had the following operating results for last year:  Because the Rubber Division sustained a loss,the president of Vanikoro is considering the elimination of this division.All of the division's traceable fixed costs could be avoided if the division was dropped.None of the allocated common corporate fixed costs could be avoided.If the Rubber Division was dropped at the beginning of last year,how much higher or lower would Vanikoro's total net operating income have been for the year?
A)$20,000 higher 
B)$50,000 higher 
C)$50,000 lower 
D)$30,000 lower

Quizplus · Accepted Answer

If the Rubber Division had been eliminated,Vanikord would have lost its segment margin of $30,000.Consequently,overall net operating income would have been $30,000 lower.

Vanikord Corporation Currently Has Two Divisions Which Had the Following