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Compute the change in operating income if olson company

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Company has three departments. Data for the most recent year is presented below:

Dept. C Dept. A Dept. T

Sales $4,000 $ 1,920 $2,240

Variable expenses 3,280 1,420 520

Unavoidable fixed expenses 480 180 440

Avoidable fixed expenses 555 265 360

Operating income (loss) $(315) $55 $920

Olson Company is considering eliminating Dept. C because it is operating at a loss.

Required:

A) Compute the change in operating income if Olson Company eliminates Dept. C and does not replace it.

B) Compute the change in operating income if Olson Company eliminates Dept. C and doubles the sales of Dept. T without increasing fixed costs.

Reference no: EM13484721

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