ABC Company's total sales volume is $10 million,with a cost of goods sold equal to 50% of sales,and total indirect expenses of $2 million.The Eastern territory has sales volume that equals $1 million and direct expenses of $200,000.In a full-cost,marketing cost analysis that uses the proportion of sales volume to allocate indirect expenses,the net profit of the Eastern territory is:

Question

Quizplus · Accepted Answer

To find the net profit of the Eastern territory using the full-cost, marketing cost analysis, we need to allocate indirect expenses based on sales volume proportion.

First, we need to calculate the total indirect expenses allocated to the Eastern territory:

Total indirect expenses allocated to Eastern territory = Total indirect expenses x (Sales volume of Eastern territory / Total sales volume)

Total indirect expenses allocated to Eastern territory = $2 million x ($1 million / $10 million) = $200,000

Next, we can calculate the total direct expenses of the Eastern territory:

Total direct expenses of Eastern territory = Cost of goods sold + Direct expenses of Eastern territory 
Total direct expenses of Eastern territory = (50% x $1 million) + $200,000 = $700,000

Finally, we can calculate the net profit of the Eastern territory:

Net profit of Eastern territory = Sales revenue - Total direct expenses - Total indirect expenses allocated to Eastern territory 
Net profit of Eastern territory = $1 million - $700,000 - $200,000 = $100,000

Therefore, the correct answer is choice B, $100,000.

ABC Company's Total Sales Volume Is $10 Million,with a Cost