The Operations of Smits Corporation Are Divided into the Childs

question 75

Multiple Choice

The operations of Smits Corporation are divided into the Childs Division and the Jackson Division.Projections for the next year are as follows: $\begin{array}{lrrr}&\text { Childs } & \text { Jackson } & \\&\text { Division } & \text { Division } & \text { Total }\\\text { Sales } & \$ 250,000 & \$ 180,000 & \$ 430,000 \\\text { Variable costs } & 90.000 & 100.000 & 190.000\\\text { Contribution margin } & \$ 160,000 & \$ 80,000 & \$ 240,000 \\\text { Direct fixed costs } & 75,000 & 62,500 & 137,500\\\text { Segment margin } & \$ 85,000 & \$ 17,500 & \$ 102,500 \\\text { Allocated common costs } & 35,000 & 27,500 & 62,500 \\\text { Operating income (loss) } & \$ 50,000 & \$(10,000) & \$ 40,000\end{array}$ Suppose the Jackson Division were dropped.What would be the operating income for Smits Corporation?

• A) $22,500
• B) $40,000
• C) $50,000
• D) $60,000

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Definitions:

Warranty Costs

Expenses a company incurs for repairing or replacing defective products under warranty.

Accrue

The process of recognizing revenue or expenses in the periods in which they are earned or incurred, regardless of when cash transactions occur.

IFRS

IFRS, or International Financial Reporting Standards, are a set of accounting standards developed by the International Accounting Standards Board (IASB) that serve as a global framework for preparing financial statements.

Current Liabilities

Short-term financial obligations of a company due within one year, including accounts payable, short-term loans, and taxes payable.