Question

Corbel Corporation has two divisions: Division A and Division B. Last month, the company reported a contribution margin of $60,000 for Division A. Division B had a contribution margin ratio of 40% and its sales were $300,000. Net operating income for the company was $40,000 and traceable fixed expenses were $80,000. Corbel Corporation's common fixed expenses were:

a) $140,000
b) $60,000
c) $100,000
d) $80,000

Answer 1

Corbel Corporation's common fixed expenses are calculated by subtracting the net operating income and traceable fixed expenses from the total contribution margin, which results in $60,000.

Step-by-step explanation:

To calculate Corbel Corporation's common fixed expenses, we use the given data: Division A's contribution margin is $60,000, Division B's contribution margin ratio is 40%, and its sales were $300,000.

Therefore, Division B's contribution margin is 40% of $300,000, which equals $120,000. Adding both contribution margins, we get the total contribution margin for the company, which is $60,000 (Division A) + $120,000 (Division B) = $180,000. The net operating income is given as $40,000, and the traceable fixed expenses are $80,000. To find common fixed expenses, we can set up the equation: Net Operating Income = Total Contribution Margin - Traceable Fixed Expenses - Common Fixed Expenses.

So, $40,000 = $180,000 - $80,000 - Common Fixed Expenses. This simplifies to Common Fixed Expenses = $180,000 - $80,000 - $40,000, which equals $60,000. Hence, the answer is option b) $60,000.