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CMA Intermediate · Management Accounting · Responsibility Accounting

A division of Kaveri Industries reports the following for the year (Rs. lakh): Sales 900; Variable costs 450; Controllable fixed costs 150; Non-controllable fixed costs traceable to the division 100; Apportioned head office costs 80. What is the division's controllable margin?

The controllable margin is Rs. 300 lakh. It equals sales of Rs. 900 lakh less variable costs of Rs. 450 lakh and controllable fixed costs of Rs. 150 lakh. Non-controllable traceable costs and apportioned head office costs are not deducted when judging the manager.

  1. ARs. 300 lakhCorrect
  2. BRs. 200 lakh
  3. CRs. 120 lakh
  4. DRs. 450 lakh

Explanation

Contribution = 900 - 450 = 450. Controllable margin = 450 - 150 controllable fixed costs = 300. Option Rs. 200 lakh also deducts the non-controllable traceable costs (that is the segment margin), and Rs. 120 lakh also deducts the apportioned head office costs.

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