Question

​DolCor, Inc. manufactures and sells two​ products: Debit and Credit. The following data were extracted from last​ month’s accounting​ records:

	Debit	Credit
Sales Revenue	​$180,000	​$190,000
Product Costs	​$144,000	​$132,000
Period Costs	​$26,400	​$28,000

​Debit’s variable product costs consist of​ $45,000 of direct​ material, $24,000 of direct​ labor, and​ $36,000 of manufacturing overhead. The remainder of its product costs are traceable fixed manufacturing overhead.​ Debit’s period costs consist of​ $20,000 of sales commission paid as a percentage of sales revenue. The remainder of its period costs are allocated common fixed costs.

​Credit’s variable cost percentage is​ 75%. Of its fixed​ costs, $11,000 are traceable. The remainder of its fixed costs are allocated common fixed costs.

Which of the following statements is​ incorrect?

A. ​Credit’s performance should be judged on a segment margin of​ $36,500.

B. ​Debit’s total traceable costs equal​ $39,000.

C. If Debit was expected to generate a segment margin of​ $18,000, it fell short of​ management’s expectations by​ $2,000.

D. The​ company’s operating income for the period equals​ $39,600.

E. Credit’s contribution margin percentage for the period is​ 25%.

Answer 1