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:

Black Market

A market in which illegal trading takes place at market-determined prices.

Market Price

The present cost at which a service or asset is available for purchase or sale in the market.

Illegal Trading

The act of buying or selling goods or services that is not permitted by law, often involving prohibited items or violating trade regulations.

Taxes On Apples

Specific charges levied by governments on the sale of apples, affecting both the price and quantity sold.