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

		Weak			Average		Strong
Sales revenue		$125,300			$455,000		$516,700
Variable expenses		53,900			247,000		303,300
Contribution margin		71,400			208,000		213,400
Direct expenses		32,500			78,200		114,300
Allocated expenses		71,000			71,000		71,000
Operating income		$(32,100)			$58,800		$28,100

(a)

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

		Weak		Average		Strong		Total
select an income statement item Operating incomeContribution marginSegment marginVariable expenseSalesAllocated expenseDirect costs		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an income statement item Variable expenseAllocated expenseDirect expenseSalesSegment marginContribution marginOperating income		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 expenseDirect expenseContribution marginSalesSegment marginAllocated expenseOperating income		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 Operating incomeSegment marginVariable expenseSalesContribution marginAllocated expenseDirect 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 Contribution marginSegment marginDirect expenseSalesOperating incomeAllocated expenseVariable 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 Allocated expenseContribution marginOperating incomeSegment marginVariable expenseSalesDirect expense								enter a dollar amount
select a closing name for this statement Segment marginDirect expenseContribution marginOperating incomeVariable expenseSalesAllocated 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 increasedecrease 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 incomeoperating loss of $enter a dollar amount for the division.