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22 October, 11:31

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%

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Answers (1)
  1. 22 October, 11:35
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    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.
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