The Rial Company\'s income statement for June is given below: Total Division F D

Question

The Rial Company's income statement for June is given below: Total Division F Division L Sales $429,500 $242,000 $187,500 Variable expenses 193,645 135,520 58,125 Contribution margin 235,855 106,480 129,375 Traceable fixed expenses 134,600 59,000 75,600 Segment margin 101,255 $47,480 $53,775 Common fixed expenses 42,000 Net operating income $59,255 During June, the sales clerks in Division F received salaries totaling $36,200. Assume that during July the salaries of these sales clerks are discontinued and instead they are paid a commission of 21% of sales. If sales in Division F increase by $93,000 as a result of this change, the July segment margin for Division F should be: $65,950 $30,950 $105,550 $54,250

Explanation / Answer

New sales = 242000 + 93000 = 335000

Contribution margin ratio = 106480 /242000 = .44 or 44%

New contribution margin        147400                     [335000*.44]

less:Fixed cost                   - 93150                       [59000 -36200 + 70350 ]      [335000*.21 = 70350]

Segiment margin                    54250

correct option is "D"

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