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The Wall-shire Company has three divisions-Northern, Western, and Southern. The divisions have the following revenues and expenses: Northernn Western Southern

Sales $450,000 $410,000 680,000
Variable expenses 225,000 140,000 242,000
Traceable fixed expenses 165,000 105,000 218,000
Allocated common corporate expenses 92,000 85,000 135,000
Net operating income (loss) $(32,000) $ 80,000 $ 85,000

Management of Kosco is considering the elimination of the Northern Division. If the Northern Division were eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given these data, what is your decision, eliminating or keeping it and why? Justify your decision, showing your calculation, and overall company's net operating income or loss, before and after eliminating Northern Division.

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  • Category:- Accounting Basics
  • Reference No.:- M942051

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