Question

1). Contribution Margin is:

a). Sales - Total Variable expenses b). Sales - Total variable expenses - Total fixed expenses c). Sales revenue per unit x Sales quantity d). Variable expense per unit x Sales quantity

2). When preparing segmented income statements fixed expense are separated into the following categories:

a). Traceable and common b).Fixed and Variable c).Direct and indirect d).Product and period

3).A Co. reported: Sales $125000; Contribution margin $62000; Total fixed expenses $42000; Common fixed expenses $15000. How much are traceable fixed expenses?

a).$27,000 b).$20,000 c).$83,000 d).$63,000

4). A Co. reported: Sales $98000; Contribution margin $33000; Total fixed expenses $27000; Traceable fixed expenses $13000. How much are common fixed expenses?

a).$14,000 b).$65,000 c).$6,000 d).$27,000

5).A Co. has two units B and C. Total fixed expenses are $66000, unit contribution margins are B $30000; C $45000. Traceable fixed expenses B $24000; C $41000. B's segment margin is:

a). 6,000 b).4,000 c).1,000 d).30,000

6).A Co. has two units B and C. Total fixed expenses are $66000, unit contribution margins are B $30000; C $45000. Traceable fixed expenses B $24000; C $41000. C's segment margin is:

a).4,000 b).6,000 c).1,000 d).45,000

Answer 1

Answer to Question 1:

Contribution Margin = Sales - Total Variable Expenses

Answer to Question 2:

When preparing segmented income statements fixed expenses are separated into traceable and common fixed expenses.

Answer to Question 3:

Total Fixed Expenses = Traceable Fixed Expenses + Common Fixed Expenses
$42,000 = Traceable Fixed Expenses + $15,000
Traceable Fixed Expenses = $27,000

Answer to Question 4:

Total Fixed Expenses = Traceable Fixed Expenses + Common Fixed Expenses
$27,000 = $13,000 + Common Fixed Expenses
Common Fixed Expenses = $14,000

Answer to Question 5:

Segment Margin for Division B = Contribution Margin - Traceable Fixed Expenses
Segment Margin for Division B = $30,000 - $24,000
Segment Margin for Division B = $6,000

Answer to Question 6:

Segment Margin for Division C = Contribution Margin - Traceable Fixed Expenses
Segment Margin for Division C = $45,000 - $41,000
Segment Margin for Division C = $4,000