Pong Incorporated\'s segmented income statement for the most recent month is giv

Question

Pong Incorporated's segmented income statement for the most recent month is given below.

If Store B sales increase by $43,000 with no change in fixed expenses, the overall company net operating income should:

increase by $4,300

increase by $27,090

increase by $31,820

increase by $8,600

Please Explain

Total Store A Store B   Sales $157,500 $61,000 $96,500   Variable expenses 53,760 28,670 25,090   Contribution margin 103,740 32,330 71,410   Traceable fixed expenses 69,100 19,900 49,200   Segment margin 34,640 $12,430 $22,210   Common fixed expenses 20,400   Net operating income $ 14,240

Explanation / Answer

contribution margin ratio = contribution margin / sales

contribution margin ratio of B = 71410 / 96500 = 0.74

change in net opearing income = contribution margin ratio * changes in sales

change in net opearing income = 0.74*43000 = 31820

answer is increase by $31820

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