48 Callahan Company consists of two divisions, Northern and Southern. During 201
ID: 2528753 • Letter: 4
Question
48 Callahan Company consists of two divisions, Northern and Southern. During 2014, many of the accounting records were destroyed in a fire. The managing director has asked the accountant for information relating to 2014. The following information is available to the accountant. Northern Division (000) $700 Southern Division (000) $500 Total (000) $1 200 Revenues Variable operating expenses Contribution margin Controllable fized expenses Fixed expenses controllable by others Business unit margin Common fixed costs Profit before taxes $720 $120 $150 $80 $50 $85 In addition, the contribution margin ratio for both divisions was the same. What were the common fixed costs (z) during 2014? A. $130 000 B. $45 000 C. $70 000 D. $65 000Explanation / Answer
Answers
Amount (000)
Working
Revenues
$ 1,200.00
[given]
variable operating expenses
$ 720.00
[given]
Contribution margin
$ 480.00
[1200 - 720]
Controllable fixed expense
$ 120.00
[given]
Fixed expense controlled by others
$ 230.00
[150 + 80]
Profit before common fixed cost
$ 130.00
[480-120-230]
Profit after common fixed cost
$ 85.00
[given]
Common Fixed Cost =
$ 45.00
[130 - 85]
Amount (000)
Working
Revenues
$ 1,200.00
[given]
variable operating expenses
$ 720.00
[given]
Contribution margin
$ 480.00
[1200 - 720]
Controllable fixed expense
$ 120.00
[given]
Fixed expense controlled by others
$ 230.00
[150 + 80]
Profit before common fixed cost
$ 130.00
[480-120-230]
Profit after common fixed cost
$ 85.00
[given]
Common Fixed Cost =
$ 45.00
[130 - 85]
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