Question

Koen Corporation has two divisions:

Division A and Division B. Last month, the company reported a contribution margin of $50,000 for Division A.
Division B had a contribution margin ratio of 30% and its sales were $250,000.
Net operating income for the company was $30,000 and traceable fixed expenses were $50,000.

Koen Corporation's common fixed expenses were:_____

Answer 1

$45,000

Step-by-step explanation:

Given that,

Contribution margin for Division A = $50,000

contribution margin ratio for Division B = 30%

Sales = $250,000

Net operating income = $30,000

Traceable fixed expenses = $50,000

Firstly, we are calculating the total contribution margin of the company by adding up the individual contribution margin of both the divisions.

Total contribution margin:

= Division A + Division B

= $50,000 + (30% × $250,000)

= $50,000 + $75,000

= $125,000

We are able to determine common fixed expenses by excluding the net operating income and traceable fixed expenses from the total contribution margin.

Common fixed expenses:

= Total contribution margin - Net operating income - Traceable fixed expenses

= $125,000 - $30,000 - $50,000

= $45,000