O\'Nel Incorporated\'s segmented income statement for the most recent month is g

Question

O'Nel Incorporated's segmented income statement for the most recent month is given below Store A $100,000 $72.000 $28,000 $21.000 $7,000 Total Company Store B $205,000 $10 Sales Variable expenses Contribution margin Traceable fixed expenses Segment margin Common fixed expenses Net operating income $300,000 $190 2.00 $108,000 $76.000 $32,000 $27 000 $5,000 20.00 $85,000 $55,000 $25,000 If Store B sales increase by $20,000 with no change in fixed expenses, the overall company net operating income should $7,000 increase by increase by $11.707 increase by increase by $20,000 $8,293

Explanation / Answer

Contribution margin ratio=Contribution margin/Sales

=(85000/205000)=0.4146(Approx)

Hence increase in Contribution margin for B=($20000*0.4146)=$8293(Approx)(C).

[No change in fixed costs would not affect net operating income.Increase in sales would bring respective changes in variable costs too].

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