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The High School Musical Company has two divisions - Troy and Gabriella. In the previous...

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The High School Musical Company has two divisions - Troy and Gabriella. In the previous year, Troy generated sales revenue of $300,000 and had total traceable costs of $80,000, $20,000 of which was fixed. Gabriella generated a segment margin of $30,000. Common fixed costs totaled $170,000; $50,000 of this amount was allocated to the Gabriella division. Management is considering the elimination of the Gabriella division since it has shown an operating loss for the past several years. If Gabriella is dropped, the company would open a new division in its place. The new division would generate $175,000 in sales revenue and have a contribution margin percentage equal to 60%. The new division's traceable fixed costs would total $25,000. In addition, it is projected that opening the new division would increase Troy's sales volume by 3%. Assume Gabriella is dropped and replaced by the new division, what would be the company's new operating income? O A. $102,200 B. $136,600 O C. $122,800 OD. $187,200 O E. $137,200

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