Cullumber, Inc. operates three divisions, Weak, Average, and Strong. As it turns out, the Weak division has the lowest operating income, and the president wants to close it. Survival of the fittest, I say! was his response when the Weak divisions manager, insisted Mark, that his division earned money for the company. Following is the most recent financial analysis for each division:

A.

B.

C.

Based on the way allocated expenses are divided among the divisions, what do you think will happen to the Average division if the company continues to prepare financial statements in this way, assuming Weak was dropped?

If Weak is dropped, then Average will report allocated expenses of $______________ , resulting in an select an option (operating income/operating loss) of $___________________ for the division.

Sales revenue Variable expenses Contribution margin Direct expenses Allocated expenses Operating income Weak $125,100 58,700 66,400 37,100 69,600 $(40,300) Average $451,500 246,300 205,200 78,200 69,600 $57,400 Strong $501,400 309,300 192,100 110,100 69,600 $12,400 Prepare a revised income statement showing the segment margin for each division. Weak Average Contribution margin Operating income Segment margin Allocated expense Direct expense Variable expense Sales