Question

The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions:
Restin Inc. Los Angeles Division Bay Area Division Central Valley Division
Revenues $750,000 $200,000 $235,000 $325,000
Variable operating expenses 410,000 110,000 120,000 180,000
Controllable fixed expenses 210,000 65,000 75,000 70,000
Noncontrollable fixed expenses 60,000 15,000 20,000 25,000
In addition, the company incurred common fixed costs of $18,000.
The profit margin controllable by the Central Valley segment manager is:
a. $32,000
b. $44,000
c. $50,000
d. $75,000
e. $145,000

Answer 1

Answer:

d. $75,000

Explanation:

                                total         Los Angeles    Bay Area  Central Valley  

Revenues           $750,000      $200,000     $235,000    $325,000

Variable exp.      $410,000        $110,000      $120,000     $180,000

Controllable       $210,000         $65,000        $75,000      $70,000

fixed expenses                                                                                      

controllable        $130,000        $25,000        $40,000      $75,000

profit margin

Noncontrollable fixed expenses and common fixed expenses are not included in the calculation of individual controllable profit margin.