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Canon Company has two sales areas: North and South
Canon Company has two sales areas: North and South. During last year, the contribution margin in the North was $50,000, or 20% of sales. The segment margin in the South was $15,000, or 8% of sales. Traceable fixed costs were $15,000 in the North and $10,000 in the South. During last year, the company reported total operating income of $26,000.
What were the total fixed costs (traceable and common) for Canon Company for the year?
Expert Solution
Computation of the total fixed costs:-
Total fixed costs = Traceable fixed costs + (Contribution margin − Fixed costs) - (Net operating income − Segment margin)
= ($15,000 + $10,000) + ($50,000 - $15,000) - ($26,000 - $15,000)
= $25,000 + $35,000 - $11,000
= $49,000
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