Question

Pippen Co. recorded operating data for its shoe division for the year. The company's desired return is 5%.

Sales $1,000,000
Contribution margin 200,000
Total direct fixed costs 120,000
Average total operating assets 400,000


Which one of the following reflects the controllable margin for the year?



a)$80,000

b)$60,000

c)20%

d)50%

Answer 1

Answer:

Option (a) is correct.

Explanation:

Given that,

Sales = $1,000,000

Contribution margin = 200,000

Total direct fixed costs = 120,000

Average total operating assets = 400,000

Controllable margin for the year:

= Contribution margin - Controllable fixed cost

= $200,000  - $120,000

= $80,000

Therefore, the controllable margin for the year is $80,000.