Wendell Company has the following information available for the past quarter:
$\begin{array}{llll}&\text { Division A }&\text { Division B }&\text { Division C }\
\text { Sales } & \$ 250,000 & \$ 400,000 & \$ 350,000 \
\text { Variable expenses } & 52 \% & 30 \% & 40 \% \
\text { Fixed expenses controllable by division manager } & \$ 60,000 & \$ 200,000 & \$ 175,000 \
\text { Fixed expenses controllable by others } & \$ 10,000 & \$ 5,000 & \$ 7,500
\end{array}$
Unallocated expenses for all three divisions are $25,000.What is the contribution by Division C?
A) $2,500
B) $27,500
C) $35,000
D) $210,000

Question

Quizplus · Accepted Answer

For Division C, the contribution margin can be calculated as follows: Sales ($350,000) - Variable expenses (40% of $350,000 = $140,000) = $210,000. Then, subtract the fixed expenses controllable by the division manager ($175,000) to get the contribution by Division C, which is $35,000. However, the question asks for the contribution, which typically refers to the contribution margin before subtracting any fixed expenses. The provided calculation inadvertently subtracted fixed expenses, leading to an incorrect interpretation. The correct approach to find the contribution should focus on the contribution margin (Sales - Variable Expenses) without subtracting fixed expenses. Therefore, the correct answer should reflect the contribution margin before subtracting fixed expenses, which was miscalculated in the explanation.

Wendell Company Has the Following Information Available for the Past