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Facebook xBest C O ? Secure https://edugen.wileyplus.com/edugen/lti/main.uni Return to Helo I Sstem Aonouncements Read, Study & Practice Gradebook ORION Downloadable eTextbook s Open Exercise 8-18 Sheridan, 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 fectest I say!" was his response when the weak dv son's manager i sisted that his division earned money for the company. Following?the most ere financal analysis for each division: e-a Weak Average Strong 128,000 $343,500 $538,40o 51,900 199,200 306,200 Sales revenue Variable expenses Contribution margin 76,100 144,300 232,200 Direct expenses 33,700 75,500 110,200 eeults by Study llocated expenses 59,800 59,800 9,800 Operating income (17,400 Your answer is partialily correct. Try agsin. Prepare a revised income statement showing the segment margin for each divisien Weak Average 30Explanation / Answer
1-
WEAK
AVERAGE
STRONG
TOTAL
SALES
128000
343500
538400
1009900
VARIABLE COST
51900
199200
306200
557300
CONTRIBUTION MARGIN
76100
144300
232200
452600
DIRECT EXPENSES
33700
75500
110200
219400
SEGMENT MARGIN
42400
68800
122000
233200
ALLOCATED EXPENSE
0
0
0
179400
OPERATING INCOME
53800
2-
AVERAGE
STRONG
TOTAL
SALES
343500
538400
881900
VARIABLE COST
199200
306200
505400
CONTRIBUTION MARGIN
144300
232200
376500
DIRECT EXPENSES
75500
110200
185700
SEGMENT MARGIN
68800
122000
190800
ALLOCATED EXPENSE
0
0
179400
OPERATING INCOME
11400
If weak division is dropped total income will decrease by (53800+11400) = 42400
53800-11400
42400
3-
AVERAGE
STRONG
SALES
343500
538400
VARIABLE COST
199200
306200
CONTRIBUTION MARGIN
144300
232200
DIRECT EXPENSES
75500
110200
SEGMENT MARGIN
68800
122000
ALLOCATED EXPENSE
89700
89700
OPERATING INCOME
-20900
32300
89700 would be allocated to average
1-
WEAK
AVERAGE
STRONG
TOTAL
SALES
128000
343500
538400
1009900
VARIABLE COST
51900
199200
306200
557300
CONTRIBUTION MARGIN
76100
144300
232200
452600
DIRECT EXPENSES
33700
75500
110200
219400
SEGMENT MARGIN
42400
68800
122000
233200
ALLOCATED EXPENSE
0
0
0
179400
OPERATING INCOME
53800
2-
AVERAGE
STRONG
TOTAL
SALES
343500
538400
881900
VARIABLE COST
199200
306200
505400
CONTRIBUTION MARGIN
144300
232200
376500
DIRECT EXPENSES
75500
110200
185700
SEGMENT MARGIN
68800
122000
190800
ALLOCATED EXPENSE
0
0
179400
OPERATING INCOME
11400
If weak division is dropped total income will decrease by (53800+11400) = 42400
53800-11400
42400
3-
AVERAGE
STRONG
SALES
343500
538400
VARIABLE COST
199200
306200
CONTRIBUTION MARGIN
144300
232200
DIRECT EXPENSES
75500
110200
SEGMENT MARGIN
68800
122000
ALLOCATED EXPENSE
89700
89700
OPERATING INCOME
-20900
32300
89700 would be allocated to average
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