Harbaugh Company recorded operating data for its shoe division for the year. The company's desired return is 5%. Which one of the following reflects the controllable margin for the year?

Question

Harbaugh Company recorded operating data for its shoe division for the year. The company's desired return is 5%.  Which one of the following reflects the controllable margin for the year?

Quizplus · Accepted Answer

Controllable Margin = (Sales Revenue - Variable Costs) - Controllable Fixed Costs
The question does not provide the sales revenue, variable costs, or controllable fixed costs, so we cannot calculate the actual controllable margin. However, we do know that the desired return is 5%, which is essentially the target profit. So, we can set up the formula as follows:
Sales Revenue - Variable Costs - Controllable Fixed Costs = 5% of Sales Revenue
Solving for Controllable Margin, we get:
Controllable Margin = Sales Revenue - Variable Costs - 5% of Sales Revenue
Controllable Margin = 95% of Sales Revenue - Variable Costs
Since we don't have any actual numbers, we can only look at the answer choices. The only one that makes sense is D) $40,000, which would represent a controllable margin of $40,000 on $800,000 of sales revenue ($40,000 / $800,000 = 5%). It is important to note that this is just an estimation and the actual controllable margin could be different based on the actual numbers.

Harbaugh Company Recorded Operating Data for Its Shoe Division for the Year