Cervetti Corporation has two major business segments-East and West. In July, the

Question

Cervetti Corporation has two major business segments-East and West. In July, the East business segment had sales revenues of $220,000, variable expenses of $125,000, and traceable fixed expenses of $29,000. During the same month, the West business segment had sales revenues of $890,000, variable expenses of $472,000, and traceable fixed expenses of $169,000. The common fixed expenses totaled $246,000 and were allocated as follows: $123,000 to the East business segment and $123,000 to the West business segment.

The contribution margin of the West business segment is:

a. 418,000

b. -57,000

c. 513,000

d. 66,000

Explanation / Answer

a. 418,000

West contribution margin = Sales ? Variable expenses

= $890,000 ? $472,000 = $418,000

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