The following is a summarized income statement for McClaron Manor Co.'s profit center 12608 for April:
$$\begin{array} { | l | r | r | }
\hline \text { Contribution Margin } & & \$ 175,000 \
\hline \text { Period Expenses } & \$ 11,000 & \
\hline \text { Manager' s Salary } & \$ 2,000 & \
\hline \text { Corporate Expense Allocation } & \$ 8,000 & \underline { ( \$ 21,0000 } \
\hline & & \$ 154,000 \
\hline
\end{array}$$ Which of the following amounts is most likely subject to the control of the profit center's manager? (CPA,adapted)
A) Contribution Margin of $175,000.
B) Contribution Margin of $175,000 and Period Expenses of $11,000.
C) Contribution Margin of $175,000 and Period Expenses of $13,000.
D) Contribution Margin of $175,000 and Period Expenses of $21,000.

Question

The following is a summarized income statement for McClaron Manor Co.'s profit center 12608 for April:
$$\begin{array} { | l | r | r | } 
\hline \text { Contribution Margin } & & \$ 175,000 \
\hline \text { Period Expenses } & \$ 11,000 & \
\hline \text { Manager' s Salary } & \$ 2,000 & \
\hline \text { Corporate Expense Allocation } & \$ 8,000 & \underline { ( \$ 21,0000 } \
\hline & & \$ 154,000 \
\hline
\end{array}$$ Which of the following amounts is most likely subject to the control of the profit center's manager? (CPA,adapted)
A) Contribution Margin of $175,000.
B) Contribution Margin of $175,000 and Period Expenses of $11,000.
C) Contribution Margin of $175,000 and Period Expenses of $13,000.
D) Contribution Margin of $175,000 and Period Expenses of $21,000.

Quizplus · Accepted Answer

The contribution margin represents the revenue generated by the profit center less variable costs directly associated with generating that revenue, and is therefore within the control of the profit center's manager. Period expenses, on the other hand, are fixed costs that are not typically directly controlled by the profit center's manager. Therefore, options B, C, and D include amounts that are not fully subject to the control of the profit center's manager.

The Following Is a Summarized Income Statement for McClaron Manor