Wingate Company has the following information available for three divisions of the company:
$\begin{array}{llll}&\text { Division A }&\text { Division B }&\text { Division C }\
\text { Sales } & \$ 250,000 & \$ 400,000 & \$ 350,000 \
\text { Variable expenses } & 52 \% & 30 \% & 40 \% \
\text { Fixed expenses controllable by division manager } & \$ 60,000 & \$ 200,000 & \$ 175,000 \
\text { Fixed expenses controllable by others } & \$ 10,000 & \$ 5,000 & \$ 7,500
\end{array}$
Unallocated expenses for all three divisions are $22,000.What is the contribution by Division A?
A) $28,000
B) $50,000
C) $60,000
D) $120,000

Question

Quizplus · Accepted Answer

Contribution margin is calculated as Sales - Variable Expenses. For Division A, variable expenses are 52% of sales, so variable expenses = 52% of $250,000 = $130,000. Thus, contribution = Sales - Variable Expenses = $250,000 - $130,000 = $120,000. However, the question asks for the contribution "by" Division A, which typically means after subtracting controllable fixed expenses. Controllable fixed expenses for Division A are $60,000. Therefore, the contribution by Division A = $120,000 - $60,000 = $60,000. The confusion arises from the interpretation of "contribution by Division A." If interpreted as contribution margin before subtracting any fixed expenses, the answer would be different. However, given the context, it seems the question seeks the net contribution after subtracting controllable fixed expenses, leading to the answer provided.

Wingate Company Has the Following Information Available for Three Divisions