Liberty Corporation Has Three Departments Required:
A

Liberty Corporation has three departments. Data for the most recent year is presented below: $$\begin{array} { l l l l } & \underline { \mathrm { A } } & \underline { \mathrm { B } } & \frac { \mathrm { C } } { } \\\text { Sales } & \$ 400 & \$ 200 & \$ 80 \\\text { Variable exp enses } & 128 & 52 & 34 \\\text { Fixed expenses: } & & & \\\text { Unavoidable } & 96 & 52 & 12 \\\text { Avoidable } & 116 & 104 & 54\end{array}$$ Required:
a. Compute the operating income of the company.
b. Compute the contribution margin and operating income of each department.
c. Should any department(s) be eliminated? If any, which one(s) and why?

Correct Answer:

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a. ($400 + $200 + $80) - ($128 + $96 + $...

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