Eyestone Corporation has two divisions, A and B. The following data pertain to operations in October: If common fixed expenses were $17,000, total fixed expenses were:
A) $48,000
B) $13,000
C) $31,000
D) $53,000

Question

Eyestone Corporation has two divisions, A and B. The following data pertain to operations in October:  If common fixed expenses were $17,000, total fixed expenses were:
A) $48,000 
B) $13,000 
C) $31,000 
D) $53,000

Quizplus · Accepted Answer

11eacbfc_c6b5_9f6f_8ffe_fff19bb88bba_TB7552_00 Division A:
Variable expenses = Variable expense ratio × Sales
= 0.60 × $80,000 = $48,000
Division B:
Variable expenses = Variable expense ratio × Sales
= 0.80 × $170,000 = $136,000
 11eacbfc_c6b5_c680_8ffe_db0633567f69_TB7552_00 Division A:
Segment margin = Contribution margin − Traceable fixed expenses
$10,000 = $32,000 − Traceable fixed expenses
Traceable fixed expenses = $32,000 − $10,000 = $22,000
Division B:
Segment margin = Contribution margin − Traceable fixed expenses
$25,000 = $34,000 − Traceable fixed expenses
Traceable fixed expenses = $34,000 − $25,000 = $9,000
 11eacbfc_c6b5_c681_8ffe_e93f0184f951_TB7552_00 Total fixed expenses = Traceable fixed expenses + Common fixed expenses
= $31,000 + $17,000 = $48,000

Eyestone Corporation Has Two Divisions, a and B