(a) Oriole, Inc. operates three divisions, Weak, Average, and Strong. As it turn

ID: 2562843 • Letter: #

Question

(a)

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 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 $345,800 $527,500 Variable expenses 56,600 197,900 306,600 Contribution margin 69,400 147,900 220,900 Direct expenses 30,300 78,200 114,100 Allocated expenses 53,500 53,500 53,500 Operating income $(14,400 ) $16,200 $53,300

Explanation / Answer

Weak

Average

Strong

Total

Sales

$ 126,000.00

$ 345,800.00

$ 527,500.00

$ 999,300.00

Variable expense

$ 56,600.00

$ 197,900.00

$ 306,600.00

$ 561,100.00

Contribution margin

$ 69,400.00

$ 147,900.00

$ 220,900.00

$ 438,200.00

Direct expense

$ 30,300.00

$ 78,200.00

$ 114,100.00

$ 222,600.00

Segment margin

$ 39,100.00

$ 69,700.00

$ 106,800.00

$ 215,600.00

Allocated expense

$ 160,500.00

Operating income

$ 55,100.00