O'Neill, Incorporated's segmented income statement for the most recent month is given below. For each of the following questions, refer back to the above original data. A proposal has been made that will lower variable expenses in Store A to 62% of sales.However, this reduction can only be accomplished by an increase in Store A's traceable fixed expenses of $8, 000.If this proposal is implemented and sales remain constant, overall company net operating income should:
A)remain the same
B)decrease by $4, 200
C)increase by $2, 000
D)increase by $8, 000

Question

O'Neill, Incorporated's segmented income statement for the most recent month is given below.  For each of the following questions, refer back to the above original data. A proposal has been made that will lower variable expenses in Store A to 62% of sales.However, this reduction can only be accomplished by an increase in Store A's traceable fixed expenses of $8, 000.If this proposal is implemented and sales remain constant, overall company net operating income should:
A)remain the same 
B)decrease by $4, 200 
C)increase by $2, 000 
D)increase by $8, 000

Quizplus · Accepted Answer

New Store A variable expenses = 0.62 × $100, 000 = $62, 000
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O'Neill, Incorporated's Segmented Income Statement for the Most Recent Month