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.
-Currently the sales clerks receive a salary of $17,000 per month in Store Q.A proposal has been made to change from a fixed salary to a sales commission of 5%.Assume that this proposal is adopted,and that as a result sales in Store Q increase by $40,000.The new segment margin for Store Q should be:
A)$47,000
B)$61,000
C)$85,000
D)$44,000

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. 
-Currently the sales clerks receive a salary of $17,000 per month in Store Q.A proposal has been made to change from a fixed salary to a sales commission of 5%.Assume that this proposal is adopted,and that as a result sales in Store Q increase by $40,000.The new segment margin for Store Q should be:
A)$47,000 
B)$61,000 
C)$85,000 
D)$44,000

Quizplus · Accepted Answer

Current variable expense ratio = Variable expenses F1F1F1S1F1F1F10 Sales = $240,000 F1F1F1S1F1F1F10 $400,000 = 0.60
Projected variable expense ratio = 0.60 + 0.05 = 0.65
Projected sales = $400,000 + $40,000 = $440,000
Projected variable expenses = 0.65 F1F1F1S1F1F1F10 $440,000 = $286,000
Projected traceable fixed expenses = $110,000 - $17,000 = $93,000
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Ring, Incorporated's Income Statement for the Most Recent Month Is