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 divisions manager, insisted Gary, that his division earned money for the company. Following is the most recent financial analysis for each division:

		Weak			Average		Strong
Sales revenue		$125,700			$457,000		$549,600
Variable expenses		59,000			247,400		304,800
Contribution margin		66,700			209,600		244,800
Direct expenses		30,500			73,500		117,200
Allocated expenses		71,800			71,800		71,800
Operating income		$(35,600)			$64,300		$55,800

(a)

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

		Weak		Average		Strong		Total
select an income statement item Direct costs Variable expense Operating income Allocated expense Sales Segment margin Contribution margin		$ enter a dollar amount		$ enter a dollar amount		$ enter a dollar amount		$ enter a dollar amount
select an income statement item Variable expense Segment margin Allocated expense Direct expense Operating income Contribution margin Sales		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a summarizing line for the first part Allocated expense Operating income Direct expense Contribution margin Segment margin SalesVariable expense		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 Direct expense Sales Allocated expense Operating income Variable expense Contribution margin Segment margin		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a summarizing line for the second part Allocated expense Direct expense Variable expense Sales Segment margin Operating income Contribution margin		$ 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 income Sales Direct expense Contribution margin Variable expense Segment margin Allocated expense								enter a dollar amount
select a closing name for this statement Segment margin Sales Contribution margin Direct expense Operating income Variable expense Allocated expense								$ enter a total amount for this statement

(b)

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

Total income will select an option increase decrease by $ enter a dollar amount .

(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?

If Weak is dropped, then Average will report allocated expenses of $ enter a dollar amount , resulting in an select an option operating income operating loss of $ enter a dollar amount for the division.