O\'Neill, Incorporated\'s segmented income statement for the most recent month i
ID: 2456129 • Letter: O
Question
O'Neill, Incorporated's segmented income statement for the most recent month is given below.
Total Company Store A Store B
Sales $300,000 $100,000 $200,000
variable expense 192,000 72,000 120,000
contribution margin 108,000 28,000 80,000
traceble fixed expense 76,000 21,000 55,000
segment margin 32,000 7,000 25,000
common fixed expense 27,000
noi 5,000
For each of the following questions, refer back to the above original data. The marketing department believes that a promotional campaign at Store A costing $6,000 will increase sales by $15,000. If its plan is adopted, overall company net operating income should:
a) decrease by $1,800
b) decrease by $10,200
c) increase by $10,200
d) increase by $1,800
show all work, no calculator allowed
Explanation / Answer
PV Ratio of product A = ( 1 - 72000/100000) i.e 0.28
Contribution earned on increase in sale of 15000 is = 15000*0.28 i.e 4200
Less: Expense incurred = 6000
Net operating income will decrease by = 6000-4200 i.e 1800
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