10 Segment margin and contribution 107 margin Simon Hinson Company operates two divisions: Gordon and Ronin. A segmented profit and loss statement for the company's most recent year is as follows: Total Gordon Ronin company division division Sales $850 000 $250 000 $600 000 Less variable expenses 505 000 145 DO0 360 000 Contribution margin $345000 $105 000 $240 000 Less traceable fixed costs 145000 45 000 100 000 Division segment margin $200 000 $ 60 000 $140 000 Less common fixed costs 130 000 Net profit $ 70 000 REQUIRED a If the Gordon Division increased its sales by $85000 per year, how much would the company's net profit change? Assume that all cost behaviour patterns remained constant. b Assume that the Ronin Division increased sales by $100000, the Gordon Division sales remained the same, and there was no change in fixed costs. Calculate the net profit amounts for each division and the total company. li Calculate the segment margin ratios before and after these changes and comment on the results. Explain the changes. c How do the sales increases and decreases impact divisional contribution margin ratio and segment margin ratio