CMA Intermediate · Management Accounting · Responsibility Accounting
Narmada Textiles Ltd.'s Division A reports: sales Rs 20,00,000; variable costs Rs 11,00,000; controllable fixed costs Rs 3,00,000; non-controllable traceable fixed costs Rs 2,00,000; allocated corporate costs Rs 1,20,000. What is the controllable margin of the division manager?
Controllable margin is Rs 6,00,000. It equals contribution of Rs 9,00,000 (sales less variable costs) minus controllable fixed costs of Rs 3,00,000. Traceable non-controllable fixed costs and allocated corporate costs are excluded because the manager cannot influence them.
- ARs 3,80,000
- BRs 4,00,000
- CRs 6,00,000Correct
- DRs 9,00,000
Explanation
Contribution = 20,00,000 - 11,00,000 = 9,00,000. Controllable margin = 9,00,000 - 3,00,000 = Rs 6,00,000. Rs 4,00,000 also deducts the non-controllable traceable fixed costs, which gives the segment margin, not the controllable margin.
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