The operations of Smits Corporation are divided into the Child Division and the Jackson Division.Projections for the next year are as follows: Operating income for Smits Corporation as a whole if the Jackson Division were dropped would be
A)$22,500.
B)$40,000.
C)$50,000.
D)$60,000.

Question

The operations of Smits Corporation are divided into the Child Division and the Jackson Division.Projections for the next year are as follows:  Operating income for Smits Corporation as a whole if the Jackson Division were dropped would be
A)$22,500. 
B)$40,000. 
C)$50,000. 
D)$60,000.

Quizplus · Accepted Answer

To calculate the operating income for Smits Corporation as a whole if the Jackson Division were dropped, we need to compare the total operating income of both divisions and then subtract the operating income of the Jackson Division.

From the given projections, we can see that the Child Division has an operating income of $30,000 and the Jackson Division has an operating income of $17,500. Therefore, the total operating income for Smits Corporation as a whole is:

Total operating income = $30,000 + $17,500 = $47,500

If the Jackson Division were dropped, Smits Corporation would only have the operating income of the Child Division, which is $30,000. Therefore, the operating income for Smits Corporation as a whole if the Jackson Division were dropped would be:

Operating income without Jackson Division = $30,000

Difference in operating income = Total operating income - Operating income without Jackson Division

Difference in operating income = $47,500 - $30,000

Difference in operating income = $17,500

Therefore, the operating income for Smits Corporation as a whole if the Jackson Division were dropped is $30,000 - $17,500 = $22,500.

Hence, the correct choice is A) $22,500.

The Operations of Smits Corporation Are Divided into the Child