A company has two divisions: A and B. Division A accounts for 60.0% of the company’s total sales. Division managers receive a bonus if their year-end segment performance margin is ≥18%. Information is given below:

Working together, the division managers want to raise their segment performance margins to 18% of sales by reclassifying some Traceable AND Controllable fixed expenses as common fixed expenses. The reclassification has no effect on the company's overall Net income.

Question: What are the total fixed expenses that must be reclassified as common if the managers are to receive their bonus?

a. $10,800

b. $22,800

c. $13,200

d. $25,200

e. None of the other answers are correct
 

Sales Contribution margin Segment Performance Margin FE: Traceable NOT Controllable Net Income $ Div A 30.00% 17.00% 18,000 $ Div B 25.00% 15.00% 21,600 $ $ Total 600,000 8,000