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The Compass Corporation has two divisions-East and West. The divisions have the following revenues and expenses: Sales ......................... Variable costs Traceable fixed costs .......... Allocated
The Compass Corporation has two divisions-East and West. The divisions have the following revenues and expenses: Sales ......................... Variable costs Traceable fixed costs .......... Allocated common corporate costs... Net operating income (loss)... East $720,000 370,000 130,000 120,000 $100,000 West $350,000 240,000 80,000 50,000 $(20,000) Management at Compass 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 of: $100,000 $120,000 $50,000 $80,000
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