Management of the company has sought your advice to do the following: A) Compute the operating income for Freedom Company. B) Compute the contribution margin for each department. C) Compute the operating income for each department. D) Advise which department(s) should be eliminated from the operation? E) You are required to explain the advice you provided in (D).

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Freedom Company has three departments. Data for the most recent year are presented below:
Dept. X
$400
Dept. Y
$200
Dept. Z
$80
Sales
Variable expenses
Unavoidable fixed expenses
Avoidable fixed expenses
128
52
34
96
52
12
116
104
54
Question:
Management of the company has sought your advice to do the following:
A) Compute the operating income for Freedom Company.
B) Compute the contribution margin for each department.
C) Compute the operating income for each department.
D) Advise which department(s) should be eliminated from the operation?
E) You are required to explain the advice you provided in (D).
You are required to show your workings for your answers provided to the management.
Transcribed Image Text:Freedom Company has three departments. Data for the most recent year are presented below: Dept. X $400 Dept. Y $200 Dept. Z $80 Sales Variable expenses Unavoidable fixed expenses Avoidable fixed expenses 128 52 34 96 52 12 116 104 54 Question: Management of the company has sought your advice to do the following: A) Compute the operating income for Freedom Company. B) Compute the contribution margin for each department. C) Compute the operating income for each department. D) Advise which department(s) should be eliminated from the operation? E) You are required to explain the advice you provided in (D). You are required to show your workings for your answers provided to the management.
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