Question

Fallow Corporation has two separate profit centers. The following information is available for the most recent year: West Division East Division Sales (net) $270,000 $420,000 Salary expense 33,000 47,000 Cost of goods sold 101,000 203,000 The West Division occupies 6,750 square feet in the plant. The East Division occupies 4,050 square feet. Rent, which was $ 54,000 for the year, is an indirect expense and is allocated based on square footage. Compute operating income for the West Division.

Answer 1

$102,250

Step-by-step explanation:

Sales $270,000

Less: Cost of goods sold $101,000

Gross profit $169,000

Less: Salary Expenses $33,000

Profit before New exp $138,000

Less: Rent expenses $33,750

Net profit $102,250

Workings

Rent expenses = $54,000 * 6750/6750+4050

Rent expenses = $54,000 * 6750/10800

Rent expenses = $54,000 * 0.625

Rent expenses = $33,750