Question

The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses:

	East			West
Sales	$	580,000​		$	474,000​
Variable costs		180,000​			229,300​
Traceable fixed costs		172,500​			208,000​
Allocated common corporate costs		114,800​			177,800​
Net operating income (loss)	$	112,700​		$	(141,100)	​

The management of Cook 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 (loss) of:

		$(141,100)
		$112,700
		$(28,400)
		$(65,100)

Answer 1

The elimination of the West Division would result in an overall company net operating income (loss) of

=(Net oprating income of East Division - Allocated Common corporate cost)

=($112,700 - 177,800​)= loss of $65,100.

Ans:- last option is right ans.

Explanation:-

Due to the elimination of west division the comapay the opration are closed in this sector but the company have to borne the Allocated Common corporate cost so the loss of this division is limited upto the common corporate cost.

in othe hand east division is in profitable zone. so profit of this division is makeup the losses of west division upto the income of east division. so we see the company has a loss of $65,100.