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 expenses3,2801,420520

Unavoidable fixed expenses480180440

Avoidable fixed expenses555265360

Operating income (loss) $(315) $55$920

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

Required:

A) Compute the change in operating income if Olson Company eliminates Dept. C and does not replace it.

B) Compute the change in operating income if Olson Company eliminates Dept. C and doubles the sales of Dept. T without increasing fixed costs.