Peppers Automotive produces auto parts for various automotive retailers. Peppers is evaluating the exhaust system division of the company and has come up with the following data for the year: net revenues are $1,300,000, variable costs are $440,000, and fixed costs are $530,000. Of the fixed costs, controllable fixed costs are $120,000 and noncontrollable fixed costs are $410,000.

question#1) What is the controllable margin and total contribution by profit center (CPC)?

controllable margin
total contribution by profit center (CPC)

question#2)

Peppers Automotive produces auto parts for various automotive retailers. Peppers is evaluating the exhaust system division of the company and has come up with the following data for the year: net revenues are $1,300,000, variable costs are $440,000, and fixed costs are $530,000. Of the fixed costs, controllable fixed costs are $120,000 and noncontrollable fixed costs are $410,000. Peppers Automotive has further analyzed the exhaust division into three products: exhaust pipes, intake valves, and intake pipes. The income statement is available below. What is the change in profit in both the short run and long run by dropping intake valves from its product line? (Loss amounts should be indicated with a minus sign.)

Exhaust Pipes

Intake Valves

Intake Pipes

Net revenues

$

600,000

$

400,000

$

300,000

Variable costs

60,000

200,000

180,000

Contribution margin

540,000

200,000

120,000

Controllable fixed costs

60,000

60,000

0

Controllable margin

480,000

140,000

120,000

Noncontrollable fixed costs

150,000

200,000

60,000

Contribution by profit center

$

330,000

$

(60,000)

$

60,000

	change in profit
in short run
in long run