Sunland, 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 that his division earned money for the company. Following is the most recent financial analysis for each division:

QUESTION:

By how much would total income change if the Weak division were dropped? TOTAL INCOME WILL (INCREASE/DECREASE) by $_________.

Sales revenue Variable expenses Contribution margin Direct expenses Allocated expenses Operating income Weak $126,500 52,400 74,100 30,300 56,200 $(12,400) Average Strong $342,600 $526,200 197,100 307,100 145,500 219,100 76,800 113,300 56,200 56.200 $12,500 $49,600 (a) Your answer is correct. Prepare a revised income statement showing the segment margin for each division. Weak Average Strong Total Sales A 126,500 342,600 526,200 995,300 T Variable expense 52,400 197,100 307,100 556,600 1 T Contribution margin 74,100 145,500 219,100 438,700 | Direct expense 30,300 76,800 113,300 220,400 TO Segment margin Segment margin | 43,800 68,700) 68,700 105,800 218,300 | Allocated expense 168,600 Operating income 49,700