In calculating the controllable contribution margin, fixed costs should be subtr

Question

In calculating the controllable contribution margin, fixed costs should be subtracted from the contribution margin: in every case. if they are controllable by the segment's management. if they are directly traceable to the segment. Both B and C. None of these. In considering a special order situation that will enable a company to make use of presently idle capacity, which of the following costs would be irrelevant Materials Depreciation Direct labor Variable overhead None of these. The type of costs presented to management for an equipment replacement decision should be limited to: relevant costs standard costs. sunk costs. controllable costs None of these.

Explanation / Answer

1)correct option is "D" Both B and c

If fixed cost is directly related to segment and is controllable ,the same should be reduced .

2)Correct option is "B"

Depreciation is a fixed cost that will be incurred whether special offer is accepted or not.

3)correct option is "A" -Relevant cost

only relevant cost is used for making decision regarding equipment decisions

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