Fernstrom Corporation has two divisions: East and West.Data from the most recent month appear below: The company's common fixed expenses total $52,140.If the company operates at exactly the break-even sales of the East Division and West Division, what would be the company's overall net operating income?
A)$0
B)($235,140)
C)($52,140)
D)$30,540

Question

Fernstrom Corporation has two divisions: East and West.Data from the most recent month appear below:  The company's common fixed expenses total $52,140.If the company operates at exactly the break-even sales of the East Division and West Division, what would be the company's overall net operating income?
A)$0 
B)($235,140) 
C)($52,140) 
D)$30,540

Quizplus · Accepted Answer

If both divisions are at their respective break-even points, their net operating incomes would be zero. Therefore, the company's overall net operating income would also be zero. However, we need to consider the common fixed expenses of $52,140, which would result in a net operating loss of $52,140. Therefore, the correct answer is (C) ($52,140). If a company operates at the break-evens of its segments, the sales will cover variable costs and traceable fixed costs, but not common fixed expenses.

Fernstrom Corporation Has Two Divisions: East and West