In: Accounting
Daytona Company operates three divisions, L, M, and Z. The following information is available for the most recent month: Daytona Company: Variable costs ............. $281,000 Common fixed costs ......... $ 92,000 Net income ................. $136,000 Division L: Traceable fixed costs ...... $ 28,000 Division M: Sales revenue .............. $190,000 Contribution margin ........ $ 57,000 Segment margin ............. $ 46,000 Division Z: Variable costs ............. $ 92,000 Variable costs ............. 40% of sales Segment margin ............. $106,000 Calculate the sales revenue reported by Division L during the most recent month.
Answer is $117,000
Let’s calculate the sales revenue reported by Daytona Company on total level:
Net Income reported = $136,000
Common Fixed Cost = $92,000
Traceable Fixed cost (Div L) = $28,000
Total Fixed Cost = $92,000 + $28,000 = $120,000
(It should be noted that Traceable fixed cost are reported on segment level while common fixed cost is the fixed cost incurred for handling more than one segment. Total Fixed Cost is sum of both)
Contribution = Fixed Cost + Net Income
= $136,000 + $120,000 = $256,000
Sales – Variable cost = Contribution
Sales = Contribution + Variable cost
Sales by Company= $256,000 + $281,000 = $537,000
Revenue for Div M is already given, let’s calculate revenue for Division Z as well
Variable cost = $92,000
Variable cost = 40% of sales
Sales = $92,000 / 40% = $230,000
Total Sales by Company = Sales (Div L + Div M + Div Z)
537,000 = Sales (Div L) + 190,000+ 230,000
Sales (Div L) = 537,000 – 420,000 = $117,000