j69 Particulars Amount Sales revenue 36,50,000 Less controllable variable costs 3,50,000 Controllable contribution margin 3,00,000 Less controllable fixed costs 2,00,000 Controllable segment margin 1,00,000 Less attributable segment costs 50,000 Segment profit contribution 50,000 Less common firm-wide costs 60,000 Loss (10,000) (11) In the short-run, division A justifies its existence as it generates a positive segment profit contribu- tion (50,000), regardless of its share of firm-wide costs. Of course, in the long-run, division A must collectively generate sufficient total profit contribution to allow the recovery of all firm-wide costs and the achievement of corporate profit goals. P.21.2 The Hypothetical Ltd has the following total operating results for the first half of current year: Sales revenue 256,00,000 Less variable costs 37,20,000 Contribution 18,80,000 Less fixed costs 10,00,000 Net income 8,80,000 The following additional information concerning the performance of each of the firm's three operating departments has been provided Departments B Sales revenue *24.00,000 220,00,000 212,00,000 Variable costs 16,80,000 12,00,000 8,40,000 Direct fixed costs 3,20,000 2,80,000 2,00,000 1. Rank the three departments on the basis of their proportionate measure of relative profitability. 2. A proposal to increase advertising expenses by 21,23,200 is expected to generate a 10 per cent in- crease in sales in all three departments. Analyse the effect of this proposal on the firm as a whole and on each department. Assume that the cost of advertising will be allocated to divisions according to each division's percentage to sales, and is to be considered as an attributable fixed cost of each department