Solution-What do you think will happen to the Average

What do you think will happen to the Average division

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Reference no: EM133078873

Question - Blossom, 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 Daniel, that his division earned money for the company. Following is the most recent financial analysis for each division:

	Weak	Average	Strong
Sales revenue	$127,800	$450,500	$520,500
Variable expenses	58,800	246,100	306,500
Contribution margin	69,000	204,400	214,000
Direct expenses	36,100	73,200	114,100
Allocated expenses	69,200	69,200	69,200
Operating income	$(36,300)	$62,000	$30,700

Required -

(a) Prepare a revised income statement showing the segment margin for each division.

(b) By how much would total income change if the Weak division were dropped?

(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?

Reference no: EM133078873

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What do you think will happen to the Average division

Reference no: EM133078873

Reference no: EM133078873

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