O\'Neill, Incorporated\'s segmented income statement for the most recent month i

Question

O'Neill, Incorporated's segmented income statement for the most recent month is given below. Total Store A Store B Sales $153,800 $63,400 $90,400 Variable expenses 58,362 28,530 29,832 Contribution margin 95,438 34,870 60,568 Traceable fixed expenses 69,700 15,100 54,600 Segment margin 25,738 $19,770 $5,968 Common fixed expenses 16,300 Net operating income $ 9,438 The marketing department believes that a promotional campaign at Store A costing $10,500 will increase sales by $22,300. If its plan is adopted, overall company net operating income should: rev: 10_20_2014_QC_55378 decrease by $1,765 decrease by $8,095 increase by $1,765 increase by $11,800

Explanation / Answer

Calculation of Net operating income before promotional campaign at Store A Store A Store B Total Sales 63400 90400 153800 Less : Variable exp. 28530 29832 58362 Contribution margin 34870 60568 95438 Less : Traceable Fixed exp. 15100 54600 69700 Segment Margin 19770 5968 25738 Less : Common fixed cost 16300 Net Income 9438 Variable cost % of sales 45.00% 33.00% 37.95% Calculation of Net operating income after promotional campaign at Store A Store A Store B Total Sales 85700 90400 176100 Less : Variable exp. 38565 29832 68397 Contribution margin 47135 60568 107703 Less : Traceable Fixed exp. 15100 54600 69700 Less : Promotional Exp. 10500 0 10500 Segment Margin 21535 5968 27503 Less : Common fixed cost 16300 Net Income 11203 Overall company net operating income will increase by $1765

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