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Oriole, Inc. operates three divisions, Weak, Average, and Strong. As it turns out, the Weak division has the lowest operating income, and the president wants
Oriole, 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 division's manager, insisted George, that his division earned money for the company. Following is the most recent financial analysis for each division: Weak Average Strong Sales revenue $126,000 $452,500 $527,500 Variable expenses 56,600 246,500 306,600 Contribution margin 69,400 206,000 220,900 Direct expenses 30,300 78,200 114,100 Allocated expenses 70,000 70,000 70.000 Operating income $(30,900) $57,800 $36,800 (a) Prepare a revised income statement showing the segment margin for each division. Weak Average Strong Allocated expense $ $ Allocated expense Direct costs Sales Contribution margin Operating income Variable expense Segment margin $ $ $ e Textbook and Media Save for Later Attempts: 0 of 3 used Submit Answer (b) By how much would total income change if the Weak division were dropped? Total income will by $ e Textbook and Media Save for Later Attempts: 0 of 3 used Submit Answer (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? Average will report allocated expenses of $ , resulting in an of $ 1 operating income operating loss e Textbook and Media Save for Later Attempts: 0 of 3 used Submit
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