The Operations of Smits Corporation Are Divided into the Childs

question 16

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: Suppose the Jackson Division were dropped.What would be the operating income for Smits Corporation?
$\begin{array}{lrrr}&\text { Childs } & \text { Jackson } & \\&\text { Division } & \text { Division } & \text { Total }\\\text { Sales } & \$ 250,000 & \$ 180,000 & \$ 430,000 \\\text { Variable costs } & 90,000 & 100,000 & 190,000\\\text { Contribution margin } & \$ 160,000 & \$ 80,000 & \$ 240,000 \\\text { Direct fixed costs } & 75,000 & 62,500 & 137,500 \\\text { Segment margin } & \$ 85,000 & \$ 17,500 & \$ 102,500 \\\text { Allocated common costs } & 35,000 & 27,500 & 62,500 \\\text { Operating income (loss) } & \$ 50,000 & \$(10,000) & \$ 40,000\end{array}$

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

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