Pampered Pet is a pet bed manufacturer located in Charleston, South Carolina. Tw

Question

Pampered Pet is a pet bed manufacturer located in Charleston, South Carolina. Two products are produced in its manufacturing facility: Spoiled and Ruint. The following information relates to its first year of operations: Spoiled Ruint Units Sold Unit Sales Price Variable Cost Percentage Traceable Fixed Costs Allocated Common Fixed Costs 10,000 $45 50% $250,000$100,000 $50,000 20,000 $30 40% $100,000 (round to the nearest dollar and enter commas where appropriate) The segment margin on which Spoiled should be judged is S Pampered Pet's operating income for the year is $170000

Explanation / Answer

Sales = 20,000 * $ 30

= $ 600,000

Variable Cost = $ 600,000 * 40%

= $ 240,000

Contribution Margin = Sales - Variable Cost

= $ 600,000 - $ 240,000

= $ 360,000

Segment Margin = Contribution Margin - Traceable Fixed Costs

= $ 360,000 - $ 250,000

= $ 110,000

Hence the correct answer is $ 110,000

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The correct answer is $ 85,000

Note:

1. For Runit:

Sales = 10000 * $ 45

= $ 450,000

Variable Cost = $ 450,000 * 50%

= $ 225,000

2. Calculation of Operating Income :

Spoiled Ruint Total Sales $ 6,00,000 4,50,000 10,50,000 Variable expenses 2,40,000 2,25,000 4,65,000 Contribution margin 3,60,000 2,25,000 5,85,000 Traceable fixed expenses 2,50,000 1,00,000 3,50,000 Segment margin $ 1,10,000 1,25,000 2,35,000 Common Fixed Expenses 1,00,000 50,000 1,50,000 net operating income 10,000 75,000 85,000

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