The Cook Company Has Two Divisions: Eastern and Western The Management of Cook Is Considering the Elimination of the Have

question 13

Multiple Choice

The Cook Company has two divisions: Eastern and Western.The divisions have the following revenues and expenses: $\begin{array}{l r r}& \underline { \text { Eastern } } & \underline { \text { Western } } \\\text { Sales } & \$ 550,000 & \$ 500,000 \\\text { Variable Costs } & \$ 275,000 & \$ 200,000 \\\text { Direct Fixed Costs } & \$ 180,000 & \$ 150,000 \\\text { Allocated Corporate Costs } & \$ 170,000 & \$ 135,000 \\\text { Operating Income (Loss) } & ( \$ 75,000 ) & \$ 15,000\end{array}$
The management of Cook is considering the elimination of the Eastern Division.If the Eastern Division were eliminated,the direct fixed costs associated with this division could be avoided.However,corporate costs would still be $305,000 in total.Given these data,what would be the overall company's operating income (loss) if the Eastern Division were eliminated?

• A) ($155,000).
• B) ($75,000).
• C) ($60,000).
• D) $15,000.

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