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Canada Company had the following operating data for the year for its computer division: sales,...

Question:

Canada Company had the following operating data for the year for its computer division: sales, $650,000; contribution margin, $140,000; total fixed costs (controllable), $100,000; and average total operating assets, $280,000. What is the controllable margin for the year?

Income Statement:

An income statement reports all revenue and expenses which affect a company over a certain time period; normally one year. The income statement is closed out to the retained earnings account on the balance sheet annually.

Answer and Explanation:


The controllable margin is $40,000 or 6.2% of sales.


The controllable margin is the percentage of sales remaining after considering total fixed costs. The controllable margin is first calculated by subtracting variable cost from sales. Contribution margin is the remaining sales after considering variable costs. Controllable fixed costs are then subtracted from contribution margin to determine controllable margin. The percentages were calculated by dividing the line item by sales.

%
Sales $650,000 100.0%
Variable Cost $510,000 78.5%
Contribution Margin $140,000 21.5%
Total Fixed Cost (Controllable) $100,000 15.4%
Operating Income (Controllable) $40,000 6.2%

Learn more about this topic:

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What Is an Income Statement? - Purpose, Components & Format

from Accounting 101: Financial Accounting

Chapter 2 / Lesson 2
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