Asked by Gloria Martin-Mays on Apr 26, 2024
Verified
Corbel Corporation has two divisions: Division A and Division B. Last month, the company reported a contribution margin of $49,700 for Division A. Division B had a contribution margin ratio of 20% and its sales were $296,000. Net operating income for the company was $33,800 and traceable fixed expenses were $56,100. Corbel Corporation's common fixed expenses were:
A) $19,000
B) $56,100
C) $75,100
D) $108,900
Traceable Fixed Expenses
Fixed costs that can be directly linked to a specific cost object, such as a department or product.
Net Operating Income
A company's gross income minus operating expenses, excluding taxes and interest charges, giving insight into the operational efficiency of the company.
- Evaluate the net operating income, incorporating routine fixed expenditures.
- Understand the allocation of common fixed expenses to divisions and its impact on division performance.
Verified Answer
SS
Sharoon SalimMay 01, 2024
Final Answer :
A
Explanation :
To find the common fixed expenses, first calculate the total contribution margin. Division B's contribution margin is 20% of $296,000 = $59,200. The total contribution margin is $49,700 (Division A) + $59,200 (Division B) = $108,900. Subtract the traceable fixed expenses ($56,100) and the net operating income ($33,800) from the total contribution margin to find the common fixed expenses: $108,900 - $56,100 - $33,800 = $19,000.
Learning Objectives
- Evaluate the net operating income, incorporating routine fixed expenditures.
- Understand the allocation of common fixed expenses to divisions and its impact on division performance.
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