The following information was taken from the segmented income statement of Restin

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Use the following to answer questions 43-47:

The following information was taken from the segmented income statement of Restin, Inc., and the company’s three divisions:

Los

Bay

Central

Restin,

Angeles

Area

Valley

Inc.

Division

Division

Division

Revenues

$750,000

$200,000

$235,000

$325,000

Variable operating expenses

410,000

110,000

120,000

180,000

Controllable fixed expenses

210,000

65,000

75,000

70,000

Noncontrollable fixed expenses

60,000

15,000

20,000

25,000

In addition, the company incurred common fixed costs of $18,000.

43. Bay Area’s segment profit margin is:

A. $14,000.

B. $18,000.

C. $20,000.

D. $40,000.

E. $115,000.

44. The profit margin controllable by the Central Valley segment manager is:

A. $32,000.

B. $44,000.

C. $50,000.

D. $75,000.

E. $145,000.

45. Assuming use of a responsibility accounting system, which of the following amounts should be used to evaluate the performance of the Los Angeles division manager?

A. $4,000.

B. $8,000.

C. $10,000.

D. $25,000.

E. $90,000.

46. Which of the following amounts should be used to evaluate whether Restin, Inc., should continue to invest company resources in the Los Angeles division?

A. $4,000.

B. $8,000.

C. $10,000.

D. $25,000.

E. $90,000.

47. Assume that the Los Angeles division increases its promotion expense, a controllable fixed cost, by $10,000. As a result, revenues increase by $50,000. If variable expenses are tied directly to revenues, the new Los Angeles segment profit margin is:

A. $12,500.

B. $22,500.

C. $32,500.

D. $50,000.

E. $60,000.

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