Ring Incorporateds income statement for the most recent mont

Ring, Incorporated\'s income statement for the most recent month is given below.

If sales in Store Q increase by $30,000 as a result of a $7,000 increase in traceable fixed costs:
A. Store Q\'s contribution margin should increase by $18,000
B. Store Q\'s segment margin should increase by $12,000
C. Store Q\'s contribution margin should increase by $11,000
D. Store Q\'s segment margin should increase by $5,000

Solution

B. Store Q\'s segment margin should increase by $12,000

Here contribution margin of storeQ =160,000/400,000=40%

Then increase in sales contribution margin=30,000*40%=$12,000.