Ring, Incorporated's income statement for the most recent month is given below.

For each of the following questions, refer back to the original data.
-If sales in Store Q increase by $30,000 as a result of a $7,000 increase in traceable fixed costs:
A)Store Q's contribution margin should increase by $18,000
B)Store Q's segment margin should increase by $12,000
C)Store Q's contribution margin should increase by $11,000
D)Store Q's segment margin should increase by $5,000

Question

Ring, Incorporated's income statement for the most recent month is given below.
 
For each of the following questions, refer back to the original data. 
-If sales in Store Q increase by $30,000 as a result of a $7,000 increase in traceable fixed costs:
A)Store Q's contribution margin should increase by $18,000 
B)Store Q's segment margin should increase by $12,000 
C)Store Q's contribution margin should increase by $11,000 
D)Store Q's segment margin should increase by $5,000

Quizplus · Accepted Answer

CM ratio = Contribution margin F1F1F1S1F1F1F10 Sales = $160,000 F1F1F1S1F1F1F10 $400,000 = 0.40
Change in contribution margin = CM ratio F1F1F1S1F1F1F10 Change in sales = 0.40 F1F1F1S1F1F1F10 $30,000 = $12,000
Change in net operating income = Change in contribution margin - Increase in traceable fixed costs
= $12,000 - $7,000 = $5,000

Ring, Incorporated's Income Statement for the Most Recent Month Is