Solution-What would have been borderland''s pre-tax income

What would have been borderland''s pre-tax income

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Reference no: EM131692738

Question - Operations of Borderland Oil Drilling Services are separated into two geographical divisions: United States and Mexico. The operating results of each division for 2013 are as follows:

	United States	Mexico	Total
Sales	$7,200,000	$3,600,000	$10,800,000
Variable costs	(4,740,000)	(2,088,000)	(6 828 000)
Contribution margin	$2,460,000	$1,512,000	$3,972,000
Direct fixed costs	(800,000)	(490,000)	(1,290,000)
Segment margin	$1,660,000	$1,022,000	$2,682,000
Corporate fixed costs	(1,900,000)	(890,000)	(2,790,000)
Operating income (loss)	$(240,000)	$132,000	$(108,000)

Corporate fixed costs are allocated to the divisions based on relative sales. Assume that all of a division's direct fixed costs could be avoided by eliminating that division. Because the U.S. division is operating at a loss, Borderland's president is considering eliminating it.

If the U.S. division had been eliminated at the beginning of the year, what would have been Borderland's pre-tax income?

Reference no: EM131692738

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What would have been borderland''s pre-tax income

Reference no: EM131692738

Reference no: EM131692738

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