Ring Incorporated's Income Statement for the Most Recent Month Is

Ring Incorporated's income statement for the most recent month is given below. $$\begin{array} { l l l l } & \text { Total } & \text { Store } P & \text { Store } Q \\\text { Sales } & £ 600,000 & £ 200,000 & £ 400,000 \\\text { Variable expenses } & \underline { 384,000 } & \underline { 144,000 } & \underline { 240,000 } \\\text { Contribution margin } & 216,000 & 56,000 & 160,000 \\\text { Traceable fixed expenses } & \underline { 152,000 } & \underline { 42,000 } & \underline { 110,000 } \\\text { Segment margin } & \underline { 64,000 } & \underline { £ 14,000 } & \underline { £ 50,000 } \\\text { Common fixed expenses } & \underline { 34,000 } & & \\\text { Net operating income } & \underline { £ 30,000 } & &\end{array}$$
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For each of the following questions, refer back to the original data. Currently the sales clerks receive a salary of £17,000 per month in Store Q. A proposal has been made to change from a fixed salary to a sales commission of 5%. Assume that this proposal is adopted, and that as a result sales in Store Q increase by £40,000. The new segment margin for Store Q should be

A) £47,000.
B) £61,000.
C) £85,000.
D) £44,000.

Correct Answer:

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