Question

Cullumber, 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 Mark, that his division earned money for the company. Following is the most recent financial analysis for each division:

		Weak			Average		Strong
Sales revenue		$125,100			$451,500		$501,400
Variable expenses		58,700			246,300		309,300
Contribution margin		66,400			205,200		192,100
Direct expenses		37,100			78,200		110,100
Allocated expenses		69,600			69,600		69,600
Operating income		$(40,300)			$57,400		$12,400

(a)

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

		Weak		Average		Strong		Total
select an income statement item                                                                      Segment marginVariable expenseSalesDirect costsAllocated expenseOperating incomeContribution margin		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an income statement item                                                                      Direct expenseSalesVariable expenseOperating incomeSegment marginContribution marginAllocated expense		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a summarizing line for the first part                                                                      Variable expenseContribution marginAllocated expenseOperating incomeDirect expenseSalesSegment margin		enter a total amount for the first part		enter a total amount for the first part		enter a total amount for the first part		enter a total amount for the first part
select an income statement item                                                                      Allocated expenseSegment marginSalesDirect expenseContribution marginOperating incomeVariable expense		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a summarizing line for the second part                                                                      Variable expenseContribution marginDirect expenseSegment marginOperating incomeSalesAllocated expense		$enter a total amount for the second part		$enter a total amount for the second part		$enter a total amount for the second part		enter a total amount for the second part
select an income statement item                                                                      Operating incomeContribution marginAllocated expenseSegment marginSalesVariable expenseDirect expense								enter a dollar amount
select a closing name for this statement                                                                      Variable expenseSalesDirect expenseOperating incomeContribution marginSegment marginAllocated expense

Answer 1

Revised Income Statement
	Weak	Average	Strong	Total
Sales	1,25,100	4,51,500	5,01,400	10,78,000
Less: Variable expenses	-58,700	-2,46,300	-3,09,300	-6,14,300
Contribution Margin	66,400	2,05,200	1,92,100	4,63,700
Less: Direct Expenses	-37,100	-78,200	-1,10,100	-2,25,400
Segment Margin	29,300	1,27,000	82,000	2,38,300
Less: Allocated expenses            ( $ 69,600 + $ 69,600 + $ 69,600 )				($ 208,800)
Operating income				$ 29,500