1. Olson Company has three departments. Data for the most recent year is presented below:

Dept. CDept. ADept. T

Sales

$4,000

$1,920

$2,240

Variable expenses

3,280

1,420

520

Unavoidable fixed expenses

480

180

440

Avoidable fixed expenses

555

265

360

Operating income (loss)

$(315)

$55

$920

Olson Company is considering eliminating Dept. C because it is operating at a loss.

Required:

1. Compute the change in operating income if Olson Company eliminates Dept. C and does not replace it.
2. Compute the change in operating income if Olson Company eliminates Dept. C and doubles the sales of Dept. T without increasing fixed costs.