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has a x and a y division. The company reported the following segmented income statement for last month: Division Total x y Sales $4,200,000 $3,000,000
has a x and a y division. The company reported the following segmented income statement for last month:
Division | |||
Total | x | y | |
Sales | $4,200,000 | $3,000,000 | $1,200,000 |
Variable expenses | 2,000,000 | 1,500,000 | 500,000 |
Contribution Margin | 2,200,000 | 1,500,000 | 700,000 |
Fixed Expenses | 2,200,000 | 1,300,000 | 900,000 |
Net operating income (loss) | 0 | 200,000 | (200,000) |
The company predicts that $100,000 of the fixed expenses being charged to the y Division are allocated costs that will continue even if the y Division is eliminated. The elimination of the y Division will additionally cause a 20% drop in x Division sales. If the company shuts down its y Division, by how much will the company's overall net operating income change?
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