If Weak is dropped, then Average will report allocated expenses of $_____ resulting in an select an (Operating Income, Operating Loss), of $______for the division. Wildhorse, Inc. operates three divisions, Weak, Average, and Strong. As it turns out, the Weak division has the lowest operatingincome, and the president wants to close it. "Survival of the fittest, I say!" was his response when the Weak division's manager, insistedChris, that his division earned money for the company. Following is the most recent financial analysis for each division:WeakAverageStrongSales revenue$ 126,900$ 450,000$ 527,600Variable expenses57,000246,000300,500Contribution margin69,900204,000227,100Direct expenses30,60077,800113,200Allocated expenses69,00069,00069,000Operating income$(29,700)$ 57,200$ 44,900 Based on the way allocated expenses are divided among the divisions, what do you think will happen to the Average division if thecompany continues to prepare financial statements in this way, assuming Weak was dropped?

Solution: Total allocated expense = Allocated to all 3 divisions = 69000 + 69000+ 69000 = $207,000…

Answered: $ 126,900 $ 450,000 $ 527,600 57,000…

$ 126,900 $ 450,000 $ 527,600 57,000 246,000 300,500 69,900 204,000 227,100 30,600 77,800 113,200 69,000 69,000 69,000 $(29,700) $ 57,200 $ 44,900

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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