Exercise 818 Part Level Submission Pharoah Inc operates thre

Exercise 8-18 (Part Level Submission) Pharoah, 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 that his division earned money for the company Follow n?is the most recent financial analysis for each division: Weak Average Strong $125,600 $349,200 $543,800 Sales revenue Variable expenses 52,500 198,700 309,600 Contribution margin 73,100 150,500 234,200 Direct expenses Allocated expenses 52,100 52,100 52,100 Operating income $(16,400) $23,300 $65,100 37,400 75,100 117,000

Solution

Answer as asked and required:

		Weak	Average	Strong	Total
A	Sales Revenue	$ 1,25,600.00	$ 3,49,200.00	$ 5,43,800.00	$ 10,18,600.00
B	Variable Expenses	$      52,500.00	$ 1,98,700.00	$ 3,09,600.00	$    5,60,800.00
C=A-B	Contribution margin	$      73,100.00	$ 1,50,500.00	$ 2,34,200.00	$    4,57,800.00
D	Direct expense [Traceable overhead/Controllable overhead]	$      37,400.00	$      75,100.00	$ 1,17,000.00	$    2,29,500.00
E=C-D	Segment margin [Controllable margin]	$      35,700.00	$      75,400.00	$ 1,17,200.00	$    2,28,300.00
F	Allocated Fixed expense [Uncontrollable overheads]				$    1,56,300.00
G=E-F	Operating Income				$        72,000.00