Denner Corporation has two divisions, A and B. The following data pertain to operations in October: If common fixed expenses were $31,000, total fixed expenses were:
A)$31,000
B)$62,000
C)$93,000
D)$52,000 Division A: Variable expenses = Variable expense ratio × Sales = 0)70 × $90,000 = $63,000 Division B: Variable expenses = Variable expense ratio × Sales = 0)60 × $150,000 = $90,000 Division A: Segment margin = Contribution margin - Traceable fixed expenses $2,000 = $27,000 - Traceable fixed expenses Traceable fixed expenses = $27,000 - $2,000 = $25,000 Division B: Segment margin = Contribution margin - Traceable fixed expenses $23,000 = $60,000 - Traceable fixed expenses Traceable fixed expenses = $60,000 - $23,000 = $37,000 Total fixed expenses = Traceable fixed expenses + Common fixed expenses = $62,000 + $31,000 = $93,000

Question

Denner Corporation has two divisions, A and B. The following data pertain to operations in October:  If common fixed expenses were $31,000, total fixed expenses were:
A)$31,000 
B)$62,000 
C)$93,000 
D)$52,000 Division A: Variable expenses = Variable expense ratio × Sales = 0)70 × $90,000 = $63,000 Division B: Variable expenses = Variable expense ratio × Sales = 0)60 × $150,000 = $90,000 Division A: Segment margin = Contribution margin - Traceable fixed expenses $2,000 = $27,000 - Traceable fixed expenses Traceable fixed expenses = $27,000 - $2,000 = $25,000 Division B: Segment margin = Contribution margin - Traceable fixed expenses $23,000 = $60,000 - Traceable fixed expenses Traceable fixed expenses = $60,000 - $23,000 = $37,000 Total fixed expenses = Traceable fixed expenses + Common fixed expenses = $62,000 + $31,000 = $93,000

Quizplus · Accepted Answer

Total fixed expenses are the sum of traceable fixed expenses and common fixed expenses. Traceable fixed expenses for Division A and Division B are $25,000 and $37,000 respectively. Therefore, total fixed expenses would be $62,000 ($25,000 + $37,000) and with the additional information that common fixed expenses are $31,000, the total fixed expenses for the company would be $93,000 (traceable fixed expenses of $62,000 + common fixed expenses of $31,000). Hence, the best choice is C.

Denner Corporation Has Two Divisions, a and B