Question

In: Accounting

Kentucky Distributors has two divisions – Northern and Southern. The divisions have provided the following financial...

Kentucky Distributors has two divisions – Northern and Southern. The divisions have provided the following financial information:

Northern Southern
Sales $150,550 $201,530
Variable costs 92,630 100,350
Common fixed costs 68,530 75,380
Operating income ($10,610) $25,800


Kentucky’s executives are considering the elimination of the Northern division. If the division is eliminated, the common fixed costs will remain unchanged. Given these data, should the Northern division be eliminated?

(Enter loss using either a negative sign preceding the number e.g. -4,527 or parentheses e.g. (4,527).)

Total With Northern Without Northern
Operating income $ $
Kentucky                                                           should OR should not eliminate the Northern division.

Save for Later

Solutions

Expert Solution

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!
Kentucky Distributors Northern
Sales       150,550.00
Less: Variable costs         92,630.00
Contribution margin         57,920.00
Continue/ Eliminate Continue Eliminate Operating Income Increase (Decrease)
Contribution margin         57,920.00                      -        (57,920.00)
Less: Fixed costs         68,530.00       68,530.00                      -  
Operating income       (10,610.00)     (68,530.00)     (57,920.00)
Net Income will decrease by $ 57,920 so Northern Division should not be eliminated.

Related Solutions

Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the...
Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period: Total Company Southern Division Northern Division Sales $ 408,800 $ 227,700 $ 181,100 Variable expenses $ 144,478 $ 86,526 $ 57,952 Traceable fixed expenses $ 206,400 $ 84,300 $ 122,100 Common fixed expense $ 81,760 $ 45,540 $ 36,220 The common fixed expenses have been allocated to the divisions on the basis of sales. The Northern Division’s break-even sales is...
1. Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for...
1. Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period: sales total company 341700 souther division 212300 northern division 129400 variable expense 118766 72182 46584 traceble fixed expenses 168400 70300 98100 common fixed expense 68340 42460 25880 The common fixed expenses have been allocated to the divisions on the basis of sales. The Northern Division’s break-even sales is closest to: 2. Data for January for Bondi Corporation and its...
The Kelsh Company has two divisions--North and South. The divisions have the following revenues and expenses:...
The Kelsh Company has two divisions--North and South. The divisions have the following revenues and expenses: North South Sales $1,060,000     $976,000    Variable Expenses $522,000     $348,000    Traceable Fixed Expenses $356,000     $290,000    Allocated Common Corporate Expenses $256,000     $206,000    Net Operating Income (Loss) $(74,000)    $132,000    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...
A- ABC company has two divisions--Women and Men. The divisions have the following revenues and expenses:...
A- ABC company has two divisions--Women and Men. The divisions have the following revenues and expenses: Women Men Sales $ 500,000 $ 550,000 Variable costs 200,000 275,000 Traceable fixed costs 150,000 180,000 Allocated common corporate costs 135,000 170,000 Net income (loss) $ 15,000 $ (75,000) The management of ABC is considering the elimination of the Men Division. If the Men Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision....
Tony's Tire and Auto Repair has two divisions split up by region—a Southern Division and a...
Tony's Tire and Auto Repair has two divisions split up by region—a Southern Division and a Northern Division. The following segmented income statement is for the most recent fiscal year ended December 31: Tony's Tire and Auto Repair Segmented Income Statements Southern Division Northern Division Sales $5,250 $31,500 Cost of goods sold 1,575 13,650 Gross margin 3,675 17,850 Allocated overhead (from corporate) 300 1,827 Selling and administrative expenses 2,205 12,600 Operating income 1,170 3,423 Income tax expense (30% rate) 351...
Tony's Tire and Auto Repair has two divisions split up by region—a Southern Division and a...
Tony's Tire and Auto Repair has two divisions split up by region—a Southern Division and a Northern Division. The following segmented income statement is for the most recent fiscal year ended December 31: Tony's Tire and Auto Repair Segmented Income Statements Southern Division Northern Division Sales $5,250 $31,500 Cost of goods sold 1,575 13,650 Gross margin 3,675 17,850 Allocated overhead (from corporate) 300 1,827 Selling and administrative expenses 2,205 12,600 Operating income 1,170 3,423 Income tax expense (30% rate) 351...
Question 3 A- ABC company has two divisions--Women and Men. The divisions have the following revenues...
Question 3 A- ABC company has two divisions--Women and Men. The divisions have the following revenues and expenses: Women Men Sales $ 500,000 $ 550,000 Variable costs 200,000 275,000 Traceable fixed costs 150,000 180,000 Allocated common corporate costs 135,000 170,000 Net income (loss) $ 15,000 $ (75,000) The management of ABC is considering the elimination of the Men Division. If the Men Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by...
Corporation has two divisions: Blue Division and Gray Division. The following financial information is for the...
Corporation has two divisions: Blue Division and Gray Division. The following financial information is for the most recent operating period: Blue Gray Division Division Sales 100,000 367,500 Variable Expenses 45,000 147,000 Traceable Fixed Expenses 37,950 139,800 Common fixed expense for Benson Corporation was $65,270. A. A properly constructed segmented income statement in the contribution format would show that net operating income of the whole company was: B. The Blue Division's break-even sales is closest to: C. What is the company's...
Colt Manufacturing has two? divisions: 1)? pistols; and? 2) rifles. Betas for the two divisions have...
Colt Manufacturing has two? divisions: 1)? pistols; and? 2) rifles. Betas for the two divisions have been determined to be beta (pistol)= 0.7 and beta ?(rifle)=1.3 The current? risk-free rate of return is 4?%, and the expected market rate of return is 10% The? after-tax cost of debt for Colt is 3.5%. The pistol? division's financial proportions are 37.5% debt and 62.5% ?equity, and the rifle? division's are 47.5% debt and 52.5% equity. a. What is the pistol? division's WACC?...
Ferntree Experiences has two operating divisions, Winery and Restaurant. The two divisions have a marketing agreement...
Ferntree Experiences has two operating divisions, Winery and Restaurant. The two divisions have a marketing agreement to provide incentives to customers. The Winery division offers coupons good for meals at the restaurant and the restaurant division offers coupons good for wine tasting and purchases. Annual profits are $12 million. The two divisions meet the requirements for segment disclosures. Before the transactions are considered, revenues and costs (in thousands of dollars) for the two divisions are as follows. Winery Restaurant Revenue...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT