Question

Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $325,000, variable expenses of $159,600, and traceable fixed expenses of $72,800. The Alpha Division has sales of $635,000, variable expenses of $345,800, and traceable fixed expenses of $135,900. The total amount of common fixed expenses not traceable to the individual divisions is $138,200. What is the company's net operating income?

Answer 1

Calculation of net operating income of BETA division:

Particulars Amount ($)

Sales 325,000

Less: Variable cost 159,600

Contribution (Sales - Variable Cost) 165,400

Less: Tracable Fixed Cost 72,800

Net Operating Income of BETA division 92,600 ( Contribution - Tracable Fixed Cost )

Calculation of net operating income of ALPHA division:

Particulars Amount ($)

Sales 635,000

Less: Variable cost 345,800

Contribution (Sales - Variable Cost ) 289,200

Less: Tracable Fixed Cost 135,900

Net Operating Income of ALPHA division 153,300 ( Contribution - Tracable Fixed Cost)

Net Operating Income of Miscavage Corporation = Net Operating Income of BETA division + Net Operating Income of ALPHA division - Untracable common fixed expenses

= $ 92,600 + $ 153,300 - $ 138,200

= $ 107,700