Question

QUESTION 4 The Compass Company has two divisions - North and South. The divisions have the following Revenues and Expenses: North South $710,000 300,000 210,000 100,000 100,000 Management at Compass is considering the elimination of the North Division. If the North Division is Sales Variable Expenses Traceable Fixed Expenses Allocated Common Corporate Expenses Net Operating Income or (Loss) $900,000 450,000 260,000 240,000 (50,000) eliminated, its traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected. Given these data, the elimination of North Division would result in an overall company net operating income of O 1. $100,000 O 2. $150,000 O3. $(140,000) O 4. $50,000 QUESTION 5 If all other things remain the same, Margin can be improved by: d. increasing selling prices O b. reducing operating expenses C.both a and b d. neither a or b QUESTION 6 In a strongly centralized organization there is a considerable amount of freedom to make decisions at all levels of management O False

Answer 1

4.

Overall company net operating income = $100,000-$(240,000)

= $(140,000)

5.

Margin can be improved by increasing selling prices.

Option A. Is correct.

6.

False, In a strongly centralized organization, all the decision-making authority lies with a group or individual at the top.

Option B. Is the correct.