Question 2:

Freeman Corporation has the excess manufacturing capacity to fill a special order from Nash, Inc. Using Freeman's normal costing process, variable costs of the special order would be $ 27,500 and fixed costs would be $ 38,000. Of the fixed costs, $ 8,500 would be for unavoidable overhead costs, and the remainder for rent on a special machine needed to complete the order. What is the minimum price Freeman should quote to Nash? $ $ Minimum price Physical Phitness, 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 Anna Hoffman, that his division earned money for the company. Following is the most recent financial analysis for each division: Weak Average Strong Sales revenue $ 125,000 $ 450,000 $ 600,000 Variable expenses 45,000 250,000 300,000 Contribution margin 80,000 200,000 300,000 Direct expenses 30,000 80,000 100,000 Allocated expenses 70,000 70,000 70,000 Operating income $(20,000) $50,000 $ 130,000 Prepare a revised income statement showing the segment margin for each division. Weak Average Strong $ $ $ $