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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.

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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.

ekkarill92 answered 2 years ago
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