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

Jeremy Hwang · Accepted Answer

Final Answer : C, Explanation :  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.

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