The Rial Company's income statement for June is given below:
-During June,the sales clerks in Division F received salaries totaling $35,000.Assume that during July the salaries of these sales clerks are discontinued and instead they are paid a commission of 18% of sales.If sales in Division F increase by $65,000 as a result of this change,the July segment margin for Division F should be:
A)$42,700
B)$19,400
C)$54,400
D)$94,000

Question

The Rial Company's income statement for June is given below:
-During June,the sales clerks in Division F received salaries totaling $35,000.Assume that during July the salaries of these sales clerks are discontinued and instead they are paid a commission of 18% of sales.If sales in Division F increase by $65,000 as a result of this change,the July segment margin for Division F should be:
A)$42,700 
B)$19,400 
C)$54,400 
D)$94,000

Quizplus · Accepted Answer

Projected sales = $220,000 + $65,000 = $285,000
Current variable expense ratio = $132,000 F1F1F1S1F1F1F10 $220,000 = 0.60
Projected variable expense ratio = 0.60 + 0.18 = 0.78
Projected variable expenses = 0.78 F1F1F1S1F1F1F10 $285,000 = $222,300
Projected traceable fixed expenses = $55,000 - $35,000 = $20,000
 11eaa48f_7ba8_f3f6_9e4a_ede4cfd9a483_TB2485_00

The Rial Company's Income Statement for June Is Given Below