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Question

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 30

Explanation / 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