Question

Tubaugh Corporation has two major business segments--East and West. In December, the East business segment had sales revenues of $240,000, variable expenses of $135,000, and traceable fixed expenses of $31,000. During the same month, the West business segment had sales revenues of $910,000, variable expenses of $480,000, and traceable fixed expenses of $173,000. The common fixed expenses totaled $254,000 and were allocated as follows: $127,000 to the East business segment and $127,000 to the West business segment. The contribution margin of the West business segment is

Answer 1

Answer:

The contribution margin of the West business segment is $430,000

Explanation:

The contribution margin is the difference between the sales revenue and the variable expense. Other cost like - fixed expense, traceable fixed cost is irrelevant while calculating the fixed cost.

So,

Contribution margin for the West business :

= Sales revenue - Variable expense

= $910,000 - $480,000

= $430,000

Thus, the contribution margin of the West business segment is $430,000