Total Gordon Ronin

Company Division Division

Sales $ 850,000 $ 250,000 $ 600,000

Less: Variable expenses 505,000 145,000 360,000

Contribution margin 345,000 $ 105,000 $ 240,000

Less: Traceable fixed costs 145,000 45,000 100,000

Division segment margin $ 200,000 $60,000 $ 140,000

Less: Common fixed costs 130,000

Net income $ 70,000

Assume that the Ronin Division increased sales by $ 100,000, the Gordon Division sales remained the same, and there was no change in fixed costs.

1. Calculate the division segment margin for each division and the net income for the company as a whole.

2. Calculate the segment margin ratios before and after these changes, and comment on the results. Explain the changes.

How do the sales increases and decreases affect the divisional contribution margin ratio and segment margin ratio