Olson Company Has Three Departments Olson Company Is Considering Eliminating Dept

question 144

Essay

Olson Company has three departments.Data for the most recent year is presented below:
$\begin{array}{llll}&\text { Dept. } C&\text { Dept. } A&\text { Dept. } T\\\text { Sales } & \$ 4,000 & \$ 1,920 & \$ 2,240 \\\text { Variable expenses } & 3,280 & 1,420 & 520 \\\text { Unavoidable fixed expenses } & 480 & 180 & 440 \\\text { Avoidable fixed expenses } & \underline{555} & \underline{265} & \underline{360} \\\text { Operating income (loss) } & \$(315) & \$ 55 & \$ 920\end{array}$
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.

• 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.

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Definitions:

Attention

The cognitive process of selectively concentrating on one aspect of the environment while ignoring other things.

Interest

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, or the attention and curiosity about a topic.

Desire

A strong feeling of wanting to have something or wishing for something to happen.

Three-step Writing Process

A structured approach to writing that includes planning, drafting, and revising to enhance clarity and effectiveness.