Nolan Company has two segments: Audio and Video.Sales for the Audio Segment were $500,000,and variable costs were 60% of sales.The Video Segment also had sales of $500,000,but variable costs were 60% of sales.Fixed costs directly traceable to the Audio and Video segments were $150,000 and $120,000,respectively.Common fixed costs of $200,000 were arbitrarily allocated equally to each segment.
What was the contribution margin of the Audio Segment.
A)$50,000
B)$300,000
C)$200,000
D)$150,000

Question

Nolan Company has two segments: Audio and Video.Sales for the Audio Segment were $500,000,and variable costs were 60% of sales.The Video Segment also had sales of $500,000,but variable costs were 60% of sales.Fixed costs directly traceable to the Audio and Video segments were $150,000 and $120,000,respectively.Common fixed costs of $200,000 were arbitrarily allocated equally to each segment. ​
What was the contribution margin of the Audio Segment.
A)$50,000
B)$300,000
C)$200,000
D)$150,000

Quizplus · Accepted Answer

The contribution margin is calculated as sales minus variable costs. For the Audio Segment, sales are $500,000 and variable costs are 60% of sales, which is $300,000. Therefore, the contribution margin is $500,000 - $300,000 = $200,000.

Nolan Company Has Two Segments: Audio and Video