Ask a question

Segment Margin Cost Accounting Question Need Help

Hi, I need detailed help with steps, and how to solve with everything explained:
Hatch Company has two divisions, O and I. During the year just ended, Division O had segment margin of $9,000 and variable expenses equal to 70% of sales. Traceable fixed expenses for Divison I were $19,000. Hatch Company as a whole had a contribution margin ratio of 40%, common fixed expenses of $10,000, a net operating income of $15,000 and sales of $200,000.
Question : Given this data, the sales for division E last year were :
A) $50,000 B) $150,000 C) $87,500 D) $116,667 E) None
Answer was shown as B) but I don't get how.

1 Answer by Expert Tutors

Tutors, sign in to answer this question.
Sam L H. | Knowledgeable Accounting and Finance TutorKnowledgeable Accounting and Finance Tut...
First there is no division E mentioned in the problem so i presumed they mean division I. The answer that i arrived at is not option B) above, the answer that i have is E) none
Here is the detail:
The whole company had total sales of 200,000 and the 40% CM is 120,000. Division O had a CM of 9000 which is equal to 30% of sales (100%-70% variable expenses). So to arrive at the sales number for division O divide 9000 by .30= 30,000 in sales. Therefore Division I sales must be =200,000-30,000= 170,000, this is my answer. if anyone disagree with me please let me know.