Devlin Company has two divisions, C and D. The overall company contribution margin ratio is 30%, with sales in the two divisions totaling $500,000. If variable expenses are $300,000 in Division C, and if Division C's contribution margin ratio is 25%, then sales in Division D must be: Select one: a. $50,000 b. $100,000 c. $150,000 d. $200,000

Question

Business

Eric Glenn

14 January, 02:16

Devlin Company has two divisions, C and D. The overall company contribution margin ratio is 30%, with sales in the two divisions totaling $500,000. If variable expenses are $300,000 in Division C, and if Division C's contribution margin ratio is 25%, then sales in Division D must be: Select one: a. $50,000 b. $100,000 c. $150,000 d. $200,000

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Answers (1)

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Tanner Brock · Answer 1

b. $100,000

Explanation:

Devlin Company

Calculation for Total company contribution margin

= $500,000 * 30% = $150,000

Calculation for Total company variable expenses

= $500,000 - $150,000 = $350,000

Division C contribution margin ratio

= (Sales - $300,000) : Sales = 0.25

Sales - $300,000 = 0.25 * Sales

(0.75 * Sales) : 0.75 = $300,000: 0.75

Sales = $400,000

Therefore Division D sales = Total company sales - Division C sales

= $500,000 - $400,000 = $100,000

Calculation for each Divisions

Total Company Division C Division D

Sales$500,000$400,000$100,000

Less variable expenses$350,000 $300,000 $50,000

Contribution margin $150,000 $100,000$ 50,000

Contribution margin ratio 0.30 0.25 0.50