Discusses on compute of net operating income

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Reference no: EM13824236

Problem-

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

Additional Requirement-

The problem belongs to Accounting and it discusses on compute of net operating income.

Reference no: EM13824236

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