O'Neill,Incorporated's segmented income statement for the most recent month is given below. For each of the following questions,refer back to the above original data. If sales in Store B increase by $30,000 as a result of a $5,000 increase in traceable fixed expenses:
A)the contribution margin should increase by $18,000
B)the segment margin should increase by $17,000
C)the contribution margin should increase by $12,000
D)the segment margin should increase by $7,000

Question

O'Neill,Incorporated's segmented income statement for the most recent month is given below.  For each of the following questions,refer back to the above original data. If sales in Store B increase by $30,000 as a result of a $5,000 increase in traceable fixed expenses:
A)the contribution margin should increase by $18,000 
B)the segment margin should increase by $17,000 
C)the contribution margin should increase by $12,000 
D)the segment margin should increase by $7,000

Quizplus · Accepted Answer

Store B CM ratio = Contribution margin ÷ Sales = $80,000 ÷ $200,000 = 0.40
Change in contribution margin = CM ratio × Change in sales = 0.40 × $30,000 = $12,000
Change in segment margin = Change in contribution margin - Change in traceable fixed costs = $12,000 - $5,000 = $7,000

O'Neill,Incorporated's Segmented Income Statement for the Most Recent Month Is