Nantua Corporation has two divisions,Southern and Northern.The following information was taken from last year's income statement segmented by division: Net operating income last year for Nantua Corporation was $400,000. If the Northern Division's sales last year were $300,000 higher,how would this have changed Nantua's net operating income? (Assume no change in selling prices,variable expenses per unit,or fixed expenses. )
A)$30,000 increase
B)$80,000 increase
C)$120,000 increase
D)$300,000 increase

Question

Nantua Corporation has two divisions,Southern and Northern.The following information was taken from last year's income statement segmented by division:  Net operating income last year for Nantua Corporation was $400,000. If the Northern Division's sales last year were $300,000 higher,how would this have changed Nantua's net operating income? (Assume no change in selling prices,variable expenses per unit,or fixed expenses. )
A)$30,000 increase 
B)$80,000 increase 
C)$120,000 increase 
D)$300,000 increase

Quizplus · Accepted Answer

Northern Division:
CM ratio = Contribution margin ÷ Sales
= $600,000 ÷ $1,500,000 = 0.40
Change in contribution margin = CM ratio × Change in sales
= 0.40 × $300,000 = $120,000

Nantua Corporation Has Two Divisions,Southern and Northern