Asked by Alyssa Hirschy on Jul 17, 2024
Verified
Corbel Corporation has two divisions: Division A and Division B. Last month, the company reported a contribution margin of $60,000 for Division A. Division B had a contribution margin ratio of 40% and its sales were $300,000. Net operating income for the company was $40,000 and traceable fixed expenses were $80,000. Corbel Corporation's common fixed expenses were:
A) $140,000
B) $60,000
C) $100,000
D) $80,000
Contribution Margin Ratio
The percentage of each sale that exceeds the variable costs and contributes to covering fixed costs and generating profit.
Traceable Fixed Expenses
Fixed costs that can be directly linked to a specific business segment or product.
- Calculate the net operating income, factoring in regular fixed overheads.
- Gain insight into the allotment of shared fixed costs to divisions and its consequences on divisional productivity.
Verified Answer
KM
Katherine McKeownJul 21, 2024
Final Answer :
B
Explanation :
Division B's contribution margin is calculated as 40% of $300,000, which equals $120,000. Adding Division A's contribution margin of $60,000 gives a total contribution margin of $180,000 for the company. Subtracting the traceable fixed expenses ($80,000) and the net operating income ($40,000) from the total contribution margin ($180,000) gives the common fixed expenses: $180,000 - $80,000 - $40,000 = $60,000.
Learning Objectives
- Calculate the net operating income, factoring in regular fixed overheads.
- Gain insight into the allotment of shared fixed costs to divisions and its consequences on divisional productivity.
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