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Nursesn Nursesn
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A month ago
Kentucky Distributors has two divisions — Northern and Southern. The divisions have provided the following financial information:

​​NorthernSouthern
Sales$150,000 $210,000
Variable costs    95,000  110,000
Common fixed costs    65,000    75,000
Operating income($ 10,000)$  25,000

Kentucky's executives are considering the elimination of the Northern division. If the division is eliminated, the common fixed costs will remain unchanged. Given these data, should the Northern division be eliminated? Why?
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Managerial Accounting

Managerial Accounting


Edition: 4th
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melryandionmelryandion
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​​Without
​NorthernSouthernTotalNorthern
Sales$150,000$210,000$360,000$210,000
Variable costs    95,000  110,000  205,000  110,000
Contribution margin55,000100,000  155,000  100,000
Common fixed costs    65,000    75,000  140,000  140,000
Operating income($  10,000)$  25,000$  15,000($ 40,000)

Kentucky should not eliminate the Northern division. It has a positive contribution, and if it is eliminated, the Southern division would have the burden of $65,000 additional common fixed costs. This would create lower income for the Southern division and the company.
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Nursesn Author
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A month ago
Thanks for your help!!
gage
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Yesterday
Thanks
lolaww
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2 hours ago
this is exactly what I needed
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