# Calculation Of Net Operating Income

Question

The Rial Company's income statement for June is given below:

 Total Division F Division L Sales \$476,000 \$296,000 \$180,000 Variable expenses 204,960 150,960 54,000 Contribution margin 271,040 145,040 126,000 Traceable fixed expenses 138,600 64,800 73,800 Segment margin 132,440 \$80,240 \$52,200 Common fixed expenses 44,600 Net operating income \$87,840

A proposal has been made that will lower variable expenses in Division L to 25% of sales. However, this reduction can only be accomplished by a \$22,800 increase in Division L's traceable fixed expenses. If this proposal is implemented and if sales remain constant, overall company net operating income should:

a. increase by \$22,800

b. increase by \$31,800

c. decrease by \$13,800

d. decrease by \$22,800

Summary

The question belongs to Accounting and it discusses about calculation of net operating income.

Total Word Count 48

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