The following information was taken from the business united profit and loss statement of Resell Real Estate Agents for 2014:
In addition, the company incurred common fixed costs of $18 000. What was the business unit margin of the Tamworth Division during 2014?
A) ($8000)
B) $4000
C) $10 000
D) $30 000

Question

The following information was taken from the business united profit and loss statement of Resell Real Estate Agents for 2014: 
In addition, the company incurred common fixed costs of $18 000. What was the business unit margin of the Tamworth Division during 2014?
A) ($8000) 
B) $4000 
C) $10 000 
D) $30 000

Quizplus · Accepted Answer

To calculate the business unit margin, we need to subtract the variable costs from the sales revenue and then deduct the common fixed costs. From the profit and loss statement, we can see that the sales revenue for the Tamworth Division was $100 000 and the variable costs were $70 000. Therefore, the contribution margin is $30 000 ($100 000 - $70 000). When we deduct the common fixed costs of $18 000, we get a business unit margin of $12 000. Therefore, the correct answer is C.

The Following Information Was Taken from the Business United Profit