The Operations of Balance Corporation Are Divided into the Kaplan

question 56

Essay

The operations of Balance Corporation are divided into the Kaplan Division and the Norton Division.Projections for the next year are as follows:
$$\begin{array} { | l | r | r | r | } \hline & \begin{array} { r } \text { Kaplan } \\\text { Division }\end{array} & \begin{array} { r } \text { Norton } \\\text { Division }\end{array} & \text { Total } \\\hline \text { Sales } & \$ 1,200,000 & \$ 600,000 & \$ 1,800,000 \\\hline \text { Variable costs } & 480,000 & 360,000 & 840,000 \\\hline \text { Contribution margin } & \$ 720,000 & \$ 240,000 & \$ 960,000 \\\hline \text { Direct fixed costs } & 160,000 & 90,000 & 250,000 \\\hline \text { Segment margin } & \$ 560,000 & \$ 150,000 & \$ 710,000 \\\hline \begin{array} { l } \text { Allocated common } \\\text { costs }\end{array} & 360,000 & 180,000 & 540,000 \\\hline \begin{array} { l } \text { Operating income } \\\text { (loss) }\end{array} & \$ 200,000 & \$ 30,000 ) & \$ 170,000 \\\hline\end{array}$$

Required:
a.Operating income for Balance Corporation as a whole if the Norton Division were dropped would be
b.If the Norton Division were dropped,Kaplan Division's sales would increase by 45%.If this happened,the operating income for Balance Corporation as a whole would be:

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Definitions:

Self-Correcting Mechanism

In economics, a self-correcting mechanism refers to the natural adjustment of markets in response to imbalances, restoring them to equilibrium without outside intervention.

De Facto Dollar Standard

An international financial system in which the U.S. dollar is used as the primary reserve currency by other countries, even though it may not be officially designated.

Monetary Policy

Control of the rate of monetary growth by the Board of Governors of the Federal Reserve.

Fixed Exchange Rates

are government-set exchange rates where a currency is pegged at a certain value against another currency, basket of currencies, or another measure of value.