Data for March for Lazarus Corporation and its two major business segments, North and South, appear below: In addition, common fixed expenses totaled $156, 000 and were allocated as follows: $84, 000 to the North business segment and $72, 000 to the South business segment. The contribution margin of the South business segment is:
A)$18, 000
B)$102, 000
C)$293, 000
D)$126, 000

Question

Data for March for Lazarus Corporation and its two major business segments, North and South, appear below:  In addition, common fixed expenses totaled $156, 000 and were allocated as follows: $84, 000 to the North business segment and $72, 000 to the South business segment. The contribution margin of the South business segment is:
A)$18, 000 
B)$102, 000 
C)$293, 000 
D)$126, 000

Quizplus · Accepted Answer

The contribution margin of Lazarus Corporation's South business segment can be calculated using the formula:

Contribution Margin = Sales - Variable Expenses

From the given data, we know that the sales revenue for the South business segment in March was $640,000 and the variable expenses were $464,000. Therefore:

Contribution Margin = $640,000 - $464,000 = $176,000

However, we also know that there were common fixed expenses of $72,000 allocated to the South business segment. Therefore, the segment's net contribution margin is:

Net Contribution Margin = Contribution Margin - Common Fixed Expenses

Net Contribution Margin = $176,000 - $72,000 = $104,000

Therefore, the contribution margin of the South business segment is $104,000, which is closest to answer choice D ($126,000).

Data for March for Lazarus Corporation and Its Two Major