Question

The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses: East West Sales $ 575,000 $ 507,000 Variable costs 168,000 301,000 Traceable fixed costs 165,000 193,000 Allocated common corporate costs 128,300 157,000 Net operating income (loss) $ 113,700 $ (144,000 ) 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: Multiple Choice $(144,000) $113,700 $(30,300) $(43,300)

The Tolar Corporation has 500 obsolete desk calculators that are carried in inventory at a total cost of $720,000. If these calculators are upgraded at a total cost of $130,000, they can be sold for a total of $190,000. As an alternative, the calculators can be sold in their present condition for $50,000.

Assume that Tolar decides to upgrade the calculators. At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition?

Multiple Choice

$770 per calculator

$270 per calculator

$360 per calculator

$130 per calculator

Answer 1

1)Net Operating income /(loss) of overall company If west division is eliminated =Net operating income from east division + Net income from west division

113700 - 157000 allocated common cost of west division

   = -43300.

correct option is "D"

2)CORRECT OPTION IS "C"- 360 per calculator

In oder to have equivalent profit if calculators are sold as it ,profit from udation must be equal to 50000

so total sales desired = 130000+ 50000= 180000

sales price per unit = 180000/ 500 = $ 360