The Milham Corporation has two divisions-East and West.The divisions have the following revenues and expenses:
Management at Milham 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,the elimination of the West Division would result in an overall company net operating income of:
A)$100,000
B)$80,000
C)$120,000
D)$50,000

Question

Quizplus · Accepted Answer

11eaa3fe_3434_880d_908b_5f7ae37e305c_TB2461_00 The company currently has a net operating income of $80,000-the combined effect of the apparent $20,000 loss in the West Division and the apparent $100,000 profit in the East Division.Dropping the West Division would reduce net operating income by $30,000.Therefore,after dropping the West Division,the overall company net operating loss would be $50,000 (= $80,000 - $30,000).

The Milham Corporation Has Two Divisions-East and West