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Solution Library
Calculation Of Net Operating Income
Question
The Rial Company's income statement for June is given below:
|
Total |
Division F |
Division L |
|
|
Sales |
$476,000 |
$296,000 |
$180,000 |
|
Variable expenses |
204,960 |
150,960 |
54,000 |
|
Contribution margin |
271,040 |
145,040 |
126,000 |
|
Traceable fixed expenses |
138,600 |
64,800 |
73,800 |
|
Segment margin |
132,440 |
$80,240 |
$52,200 |
|
Common fixed expenses |
44,600 |
||
|
Net operating income |
$87,840 |
A proposal has been made that will lower variable expenses in Division L to 25% of sales. However, this reduction can only be accomplished by a $22,800 increase in Division L's traceable fixed expenses. If this proposal is implemented and if sales remain constant, overall company net operating income should:
a. increase by $22,800
b. increase by $31,800
c. decrease by $13,800
d. decrease by $22,800
Summary
The question belongs to Accounting and it discusses about calculation of net operating income.
Total Word Count 48
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