Channing Corporation has two divisions, C and D. The overall company contribution margin ratio is 30%, with sales in the two divisions totaling $750,000. If variable expenses are $450,000 in Division C and if Division C's contribution margin ratio is 25%, then sales in Division D must be:
A)$75,000
B)$225,000
C)$150,000
D)$300,000

Question

Quizplus · Accepted Answer

Explanation:The overall contribution margin ratio is 30%, so the total contribution margin is $750,000 x 0.30 = $225,000. Division C's contribution margin ratio is 25%, so its contribution margin is $450,000 x 0.25 = $112,500. Therefore, Division D's contribution margin must be $225,000 - $112,500 = $112,500. Division D's sales must be $112,500 / 0.50 = $225,000.

Channing Corporation Has Two Divisions, C and D