Meyer Corporation has two sales areas: North and South. During April, the contribution margin in the North was $90,000, or 30% of sales. The segment margin in the South was $25,000, or 10% of sales. Traceable fixed expenses were $30,000 in the North and $15,000 in the South. Meyer Corporation reported a total net operating income of $52,000. The total sales for Meyer Corporation were:
A)$983,333
B)$430,000
C)$550,000
D)$480,000

Question

Quizplus · Accepted Answer

To find the total sales for Meyer Corporation, we can use the formula:

Total Sales = (Contribution Margin + Traceable Fixed Expenses) / Contribution Margin Ratio

For the North:

Contribution Margin = $90,000
Contribution Margin Ratio = 30% = 0.30
Traceable Fixed Expenses = $30,000

Total Sales North = ($90,000 + $30,000) / 0.30 = $400,000

For the South:

Segment Margin = $25,000
Segment Margin Ratio = 10% = 0.10
Traceable Fixed Expenses = $15,000

Total Sales South = ($25,000 + $15,000) / 0.10 = $400,000

Now, we can find the total sales for Meyer Corporation by adding the sales from the North and South:

Total Sales = $400,000 + $400,000 = $800,000

We also know that the total net operating income was $52,000. Using the formula:

Net Operating Income = Total Sales - Total Variable Expenses - Total Fixed Expenses

We can rearrange it to:

Total Sales = (Net Operating Income + Total Fixed Expenses) / Contribution Margin Ratio

Total Fixed Expenses = Traceable Fixed Expenses (North) + Traceable Fixed Expenses (South) = $30,000 + $15,000 = $45,000

For Meyer Corporation:

Net Operating Income = $52,000
Contribution Margin Ratio = (Contribution Margin / Total Sales) = ($90,000 + $25,000) / $800,000 = 0.15625

Total Sales = ($52,000 + $45,000) / 0.15625 = $550,000

Therefore, the best choice is C) $550,000 as it is the total sales for Meyer Corporation.

Meyer Corporation Has Two Sales Areas: North and South