Asked by Laura-Leigh Holley on May 09, 2024
Verified
Eyestone Corporation has two divisions, A and B.The following data pertain to operations in October: If common fixed expenses were $17,000, total fixed expenses were:
A) $48,000
B) $13,000
C) $31,000
D) $53,000
Common Fixed Expenses
Expenses that do not vary with the level of production or sales, and are shared across different segments or products of a company.
Total Fixed Expenses
The cumulative amount of all expenses that do not change with the level of production or sales within a certain range and period.
Division A
A designated segment or business unit within a larger organization, typically focused on a specific product line or market sector.
- Distinguish and compute the impact of traceable and shared fixed costs on the financial outcomes of both divisions and the entire corporation.
Verified Answer
Variable expenses = Variable expense ratio × Sales
= 0.60 × $80,000 = $48,000
Division B:
Variable expenses = Variable expense ratio × Sales
= 0.80 × $170,000 = $136,000 Division A:
Segment margin = Contribution margin - Traceable fixed expenses
$10,000 = $32,000 - Traceable fixed expenses
Traceable fixed expenses = $32,000 - $10,000 = $22,000
Division B:
Segment margin = Contribution margin - Traceable fixed expenses
$25,000 = $34,000 - Traceable fixed expenses
Traceable fixed expenses = $34,000 - $25,000 = $9,000 Total fixed expenses = Traceable fixed expenses + Common fixed expenses
= $31,000 + $17,000 = $48,000
Learning Objectives
- Distinguish and compute the impact of traceable and shared fixed costs on the financial outcomes of both divisions and the entire corporation.
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