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

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 Southern Northern Income Statement

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

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

-$ 1,600,000 -$ 700,000 -$ 600,000

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

-$ 900,000

$ 800,000 Net Operating Income

Simulated Situation

TOTAL Southern Northern Income Statement

$ 8.600.000 $ 5.000.000 $ 3.600.000 Total Net Sales

$ 3.540.000 $ 2.100.000 $ 1.440.000 Contributing Margin

-$ 1.600.000 -$ 700.000 -$ 600.000

$ 1.940.000 $ 1.400.000 $ 840.000 Segment Margin

-$ 900.000

$ 1.040.000 Net Operating Income