Skyler White, Inc. manufactures and sells two products: Jeeps and Cell Phones. The following information was extracted from the company's accounting records from last period.
Jeeps Cell Phones
Sales Revenue $350,000 $325,000
Product Costs $220,000 $150,000
Period Costs $25,000 $30,000
The Jeep product line has the following breakout of product costs: Direct Materials of $60,000, Direct Labor of $30,000, and Manufacturing Overhead of $35,000. The remaining product costs are traceable fixed manufacturing overhead costs. The period costs of the Jeep line are made up of $15,000 of Sales Commissions (which is paid as a percentage of sales revenue), and $10,000 of arbitrarily allocated common fixed costs.
The Cell Phone line has a contribution margin percentage of 60%. Of the fixed costs in the Cell Phone line, $30,000 are traceable fixed costs and the remainder are arbitrarily allocated common fixed costs.
Which of the following statements is incorrect?
Question 9 options:
Traceable costs for the Cell Phone line are $160,000.
The company's operating income for the period equals $250,000.
The Jeeps line performance should be analyzed based on a segment margin of $115,000.
If the Cell Phone line was expected to achieve a segment margin of $170,000, management would be pleased with the performance of the division.
The variable cost percentage of the Cell Phone line is 40%.
