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. Total Store A Store B Sales $162,400 $68,000 $94,400 Variable expenses 57,448 31,960 25,488 Contribution margin 104,952 36,040 68,912 Traceable fixed expenses 75,300 23,800 51,500 Segment margin 29,652 $12,240 $17,412 Common fixed expenses 15,000 Net operating income $ 14,652 The marketing department believes that a promotional campaign for Store A costing $15,000 will increase sales by $23,700. If its plan is adopted, overall company net operating income should: rev: 10_20_2014_QC_55378 increase by $2,439 decrease by $7,039 decrease by $2,439 increase by $8,700

Explanation / Answer

exisiting variable expenses = ( 31960/68000 )= 47% of Sales

therefore when sales increases by $ 23700 variable expenses also increase by $11139

Exisitng Net Operating income = $ 14652

Therefore decrease in Net Operating Income = $ ( 14652- 12213) = $ 2439

PARTICULARS STORE A STORE B TOTAL Sales 91700 94400 186100 Less: Variable Expenses 43099 25488 68587 Contribution Margin 48601 68912 117513 Traceable Fixed Expenses 38800 51500 90300 27213 Common Fixed Expenses 15000 Net operating income 12213

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