Question

ABC Company has three divisions, J, P, and W. The following
information is available for the most recent month:

ABC Company:
Sales revenue .............. $513,000
Total fixed costs .......... $125,320
Net income ................. $ 57,300

Division J:
Sales revenue .............. $163,000
Segment margin ............. $ 20,810

Division P:
Contribution margin ........ $ 30,150
Traceable fixed costs ...... $ 14,270
Variable cost ratio ........    85% of sales in Division P

Division W:
Variable costs ............. $ 41,720
Segment margin ............. $ 67,370

Calculate the traceable fixed costs reported by Division J
during the most recent month.

Answer 1

Answer:

Traceable Fixed Cost of Division J is $ 24,380.

Please refer below working for the same. Remarks for each division are very important.

	ABC Company
Sr. No.	Particulars	Total	Division J	Division P	Division W
		Amount	Remarks	Amount	Remarks	Amount	Remarks	Amount	Remarks
1	Sales	$   513,000	Already given	$   163,000	Already given	$   201,000	= $30,150/15*100	$     149,000	= $513,000 - $163,000 - $201,000
2	Less: Variable Cost	$   330,380	Sr. No. 1 less Sr. No. 3	$   117,810	=$330,380 - $170,850 - $41,720	$   170,850	85% of Sale	$        41,720	Already given
3	Contribution	$   182,620	Sr. No. 4 + Sr. No. 5	$     45,190	=$182,620 - $30,150 - $107,280	$     30,150	Already given (i.e. 15% because Variable cost is 85%)	$     107,280	=$ 149,000 less $ 41,720
4	Less: Traceble Fixed Cost	$     78,560	$125,320 - $46,760 (Sr. No. 6)	$     24,380	=$78560 - $14,270 - $39,910	$     14,270	Already given	$        39,910	= $ 107,280 less $ 67,370
5	Segment Margin	$   104,060	Total of all 3 divison (J+P+W)	$     20,810	Already given	$     15,880	=$30,150 - $14,270	$        67,370	Already given
6	Less: Other Fixed Cost	$     46,760	Sr. No. 5 less Sr. No. 7
7	Profit	$     57,300	Already given

First we will find out Sales Value of each division

However Sales of Division P & Division W is not given

So we will find out sales of Division P as below:

Contribution Margin = Sales less Variable Cost

Here Variable cost = 85% of Sales in Division P

Hence, Contribution will 15% of Sales as Contribution Margin + Variable Cost = Sales

Sales of Division P = Contribution Margin of division P / 15 * 100

Sales of Division P = $ 30,150 / 15 *100

Sales of Division P = $ 201,000

Total Sales of ABC Company = Sales of Division J + Sales of Division P + Sales of Division W

$ 513,000 = $ 163,000 + $ 201,000 + Sales of Division W

Sales of Division W = $ 513,000 - $ 163,000 - $ 201,000

Sales of Division W = $ 149,000

So this way all working of Division P & Division W has been worked out as major values given for both this division.

After arriving most of the values of Division P & Division W, we have worked out Total Values of ABC Company on basis of available information as well as for Division J.(whcih are mostly balance figures of Total Values of ABC Company less Values of Division P & Division W)