The following information was taken from the segmented income statement of Resti
ID: 2499004 • Letter: T
Question
The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions
Assume that the Los Angeles division increases its promotion expense, a controllable fixed cost, by $10,000. As a result, revenues increase by $50,000. If variable expenses are tied directly to revenues, the new Los Angeles segment profit margin is
Central Valley Inc. Division DivinDivision $750,000 $200,000 $235,000 $325,000 410,000 110,000 120,000180,000 70,000 25,000 Los Restin, Angeles Area Bay Revenues Variable operating expenses Controllable fixed expenses Noncontrollable fixed expenses 210,000 65,00075,000 60,000 15,00020,000Explanation / Answer
LOS ANGELES SEGEMENT PROFIT MARGIN
NEW REVENUE =$250000
LESS- VARIABLE OPERATING EXPENSES($110000 / $200000 *$250000) =$137500
LESS- CONTROLABLE FIXED EXPENSES ($65000 + $10000) =$75000
LESS-NON CONTROLABLE FIXED EXPENSES =$15000
SEGEMENT PROFIT MARGIN =$22500
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