Question

Cervetti Corporation has two major business segments, East and West. In July, the East business segment had sales revenues of $220,000, variable expenses of $125,000, and traceable fixed expenses of $29,000. During the same month, the West business segment had sales revenues of $890,000, variable expenses of $472,000, and traceable fixed expenses of $169,000. The common fixed expenses totaled $246,000 and were allocated as follows: $123,000 to the East business segment and $123,000 to the West business segment.

The contribution margin of the West business segment is:

a. $418,000
b. $66,000
c. -$57,000
d. $513,000

Answer 1

a. $418,000

Step-by-step explanation:

The computation of the contribution margin of the West business segment is shown below:

Contribution margin = Sales revenue - variable expenses

= $890,000 - $472,000

= $418,000

By deducting the variable expenses from the sales revenue we can get the contribution margin and we applied the same that is shown above.