Question

THE Company produces three products, A, B, and C.
The following information relates to THE Company
and its three products for June:

THE Company:
Sales revenue .............. $700,000
Segment margin ............. $204,000
Net income ................. $169,000

Product A:
Sales revenue .............. $200,000
Contribution margin ........ $104,000
Segment margin ............. $ 19,000

Product B:
Variable costs ............. 30% of sales of Product B

Product C:
Variable costs ............. $181,000
Traceable fixed costs ...... $ 36,000
Contribution margin ........ 20% of sales of Product C

Part A.) Calculate the variable costs of Product B during June.

Part B.) Calculate the segment margin of Product C during June.

Part C.) Calculate the total fixed costs incurred by THE
Company during June.

Answer 1

Amounts are in $

Step 1

Product C Sales will be Variable cost x 100/80 (because given 20% of sales is Contribution)

= 181,000 x 100/80

= 226,250

Step 2

Finding the Segment margin of C

Sales = 226,250 (from step 1)

Variable cost = (181,000)

Contribution margin = 45,250

Traceable fixed cost = (36,000)

Segment margin = 9,250

Step 3

Sales of B = Total Sales - Sale of A and Sale of C

= 700,000 - 200,000 - 226,250 (from step 1)

= 273,750

Step 4

Variable cost of B = 30% of Sales

= 30% of 273,750 (from step 3)

= 82,125

Step 5

Finding Segment margin of B = Total Segment margin - Segment margin of A - Segment margin of C

= 204,000 - 19,000 - 9,250 (from step 2)

= 175,750

Step 6

Finding traceable Fixed cost of B = Contribution of B - Segment margin of B

= (273,750 - 82,125) (from steps 3 &4) - 175,750 (from step 5)

= 15,875

Step 7

Total Traceable fixed cost = Sum of traceable fixed costs of each product

= (Contribution margin - Segment margin of A) + Traceable fixed cost of B (from step 6) + Traceable fixed cost of C (from step 2)

= (104,000-19,000) + 15,875 + 36,000

= 136,875

Step 8

Total Fixed Cost = Traceable fixed cost + Untraceable/Common fixed cost

= 136,875 (from step 7) + (Segment margin - Net income of company)

= 136,875 + (204,000 - 169,000)

= 171,875

For Part A of question

Step 4 : 82,125 is answer

For Part B of question

Step 2 : 9,250 is answer

For Part C of question

Step 8 : 171,875 is answer