Martz Company Has Three Departments Martz Company Is Considering Eliminating Department C Because It Has

question 48

Essay

Martz Company has three departments. Data for the most recent year is presented below: $\begin{array}{llll}&C&A&T\\\text { Sales } & \$ 4,000 & \$ 1,920 & \$ 2,240 \\\text { Variable expenses } & 3,280 & 1,420 & 520 \\\text { Fixed expenses: } & & & \\\text { Unavoidable } & 480 & 180 & 440 \\\text { Avoidable } & 555 & 265 & 360\\\text { Operating income (loss)}&(315)&55&920\end{array}$ Martz Company is considering eliminating department C because it has a loss. Required:
a. Compute the change in operating income if Martz Company eliminates Department C and does not replace it.
b. Compute the change in operating income if Martz Company replaces Department C with a second Department T. This will double the sales of Department T without increasing fixed cost.

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Definitions:

Inkblot Card

A psychological tool used in the Rorschach test where individuals’ perceptions of inkblots are analyzed to understand their psychological functioning.

Projective Assessment

Psychological testing methods where the responses to ambiguous stimuli are analyzed to uncover hidden emotions and internal conflicts.

Unconscious Drives

Deep-seated desires or motivations that influence behavior, of which an individual might not be explicitly aware.

Abnormal Functioning

Impaired or deviant operation of a system or organ, differing from normal or expected functioning.