Nantor corporation has two divisions, southern and northern. the following information was taken from last year's income statement segmented by division:

total company southern northern
sales $ 8,000,000 $ 5,000,000 $ 3,000,000
contribution margin $ 3,300,000 $ 2,100,000 $ 1,200,000
divisional segment margin $ 1,700,000 $ 1,400,000 $ 600,000
net operating income last year for nantua corporation was $800,000.

if the northern division's sales last year were $600,000 higher, how would this have changed nantua's net operating income? (assume no change in selling prices, variable expenses per unit, or fixed expenses.)

$240,000 increase

$60,000 increase

$160,000 increase

$1,200,000 increase

$240,000 increase

Explanation:

An increase in the Northern Division's sales of $600,000 would have had and impact of a $240,000 increase in the company's total net operating Income.

The $240,000 arise of the following detail:

An increase of $600,000 in the Northern Division has an impact in the variable cost but not in the fixed ones, the total fixed cost of $1,600,000 are not modified by an increase of total sales and the Other Expenses (Financial and Taxes) of -$900,000 neither.

Current Situation

TOTAL    SouthernNorthernIncome Statement

$ 8,000,000$ 5,000,000$ 3,000,000Total Net Sales

$ 3,300,000$ 2,100,000$ 1,200,000Contributing Margin

-$ 1,600,000-$ 700,000-$ 600,000  

$ 1,700,000$ 1,400,000$ 600,000Segment Margin

-$ 900,000    

$ 800,000Net Operating Income  

Simulated Situation

TOTAL    SouthernNorthernIncome Statement

$ 8.600.000$ 5.000.000$ 3.600.000Total Net Sales

$ 3.540.000$ 2.100.000$ 1.440.000Contributing Margin

-$ 1.600.000-$ 700.000-$ 600.000  

$ 1.940.000$ 1.400.000$ 840.000Segment Margin

-$ 900.000    

$ 1.040.000Net Operating Income  

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