Question

During April, Division D of Carney Company had a segment margin ratio of 15%, a variable expense ratio of 60% of sales, and traceable fixed expenses of $15,000. Division D's sales were closest to which of the following?:

A. $22,500
B. $100,000
C. $60,000
D. $33,333

Answer 1

The segment margin ratio, variable expense ratio, and traceable fixed expenses are used to calculate the sales value for Division D. Based on the given information, Division D's sales were closest to $33,333.

Step-by-step explanation:

The segment margin ratio is calculated by dividing the segment margin by the net sales. In this case, the segment margin ratio is 15%. The variable expense ratio is calculated by dividing the variable expenses by the net sales. Here, the variable expense ratio is 60%. Since the segment margin ratio is equal to the difference between the variable expense ratio and 100%, we can calculate the segment margin as 100% - 60% = 40%.

Traceable fixed expenses are those expenses that can be directly traced back to a specific segment. In this case, the traceable fixed expenses are $15,000. The segment margin can then be calculated as a percentage of sales to determine the sales value.

To calculate the sales, we use the formula: Sales = (Segment Margin / Segment Margin Ratio) × 100. Plugging in the values, Sales = ($15,000 / 40%) × 100 = $37,500.

Therefore, Division D's sales were closest to option D: $33,333.