Ring Incorporated's Income Statement for the Most Recent Month Is

question 34

Multiple Choice

Ring Incorporated's income statement for the most recent month is given below. $$\begin{array} { l l l l } & \text { Total } & \text { Store } P & \text { Store } Q \\\text { Sales } & £ 600,000 & £ 200,000 & £ 400,000 \\\text { Variable expenses } & \underline { 384,000 } & \underline { 144,000 } & \underline { 240,000 } \\\text { Contribution margin } & 216,000 & 56,000 & 160,000 \\\text { Traceable fixed expenses } & \underline { 152,000 } & \underline { 42,000 } & \underline { 110,000 } \\\text { Segment margin } & \underline { 64,000 } & \underline { £ 14,000 } & \underline { £ 50,000 } \\\text { Common fixed expenses } & \underline { 34,000 } & & \\\text { Net operating income } & \underline { £ 30,000 } & &\end{array}$$
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For each of the following questions, refer back to the original data. Currently the sales clerks receive a salary of £17,000 per month in Store Q. A proposal has been made to change from a fixed salary to a sales commission of 5%. Assume that this proposal is adopted, and that as a result sales in Store Q increase by £40,000. The new segment margin for Store Q should be

• A)£47,000.
• B)£61,000.
• C)£85,000.
• D)£44,000.

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Definitions:

Carrier

In telecommunications, an entity that provides services for transmitting data and communications; in transportation, a company responsible for transporting goods or passengers.

FOB

Stands for Free On Board, a term used in international shipping indicating that the seller bears the cost of loading goods onto a shipping vessel, while the buyer pays for transportation and insurance.

Shipment Contract

A sales agreement where the seller is obligated to send the goods to a specific destination, and the risk of loss passes to the buyer when the goods are delivered to the carrier.

Risk of Loss

The responsibility for the loss of goods during shipment, transfer, or at any time before the completion of a sale, typically determined by contract terms.