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chonawilson4
12.05.2021 •
Business
Power Inc. has two divisions, Windsor and Ridge. Following is the income statement for the past month: Windsor Ridge Total Sales $ 360,200 $ 320,100 $ 680,300 Variable Costs 280,200 150,200 $ 430,400 Contribution Margin $ 80,000 $ 169,900 $ 249,900 Fixed Costs (allocated) 121,700 128,200 $ 249,900 Profit Margin $ (41,700 ) $ 41,700 $ 0 What would Power's profit margin be if the Windsor division was dropped and all fixed costs are unavoidable?.
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Ответ:
- $ 80,000
Explanation:
The existing Power's profit margin is $0 ($41,700 - $41,700 + $0).
Dropping Windsor division has the following effect :
Increase in cost - opportunity cost of $ 80,000
The opportunity is due to lost contribution
Fixed costs are unavoidable thus, they are irrelevant when doing this calculation.
thus,
Power's profit margin will be - $ 80,000 if the Windsor division was dropped.
Ответ:
The contribution margin of the West business segment is $430,000
Explanation:
The contribution margin is the difference between the sales revenue and the variable expense. Other cost like - fixed expense, traceable fixed cost is irrelevant while calculating the fixed cost.
So,
Contribution margin for the West business :
= Sales revenue - Variable expense
= $910,000 - $480,000
= $430,000
Thus, the contribution margin of the West business segment is $430,000