Pippen Co. recorded operating data for its shoe division for the year. The company's desired return is 5%.

Sales $1,000,000

Contribution margin 200,000

Total direct fixed costs 120,000

Average total operating assets 400,000

Which one of the following reflects the controllable margin for the year?

a) $80,000

b) $60,000

c) 20%

d) 50%

Option (a) is correct.

Explanation:

Given that,

Sales = $1,000,000

Contribution margin = 200,000

Total direct fixed costs = 120,000

Average total operating assets = 400,000

Controllable margin for the year:

= Contribution margin - Controllable fixed cost

= $200,000 - $120,000

= $80,000

Therefore, the controllable margin for the year is $80,000.