Question

Bovine Corporation has two divisions: televisions and mobile phones. The mobile phone division has a contribution margin of $600,000. The company's common fixed costs and total traceable fixed costs are $100,000 and $500,000 respectively.
What is the segment margin of the mobile phone division, assuming the traceable fixed costs of the television division are $300,000?

a) $100,000 b) $200,000 c) $300,000 d) $400,000

Answer 1

Answer:

d) $400,000

Explanation:

The traceable fixed costs of the mobile phone division is:

= The company's total traceable fixed costs - total traceable fixed costs of television division

= $500,000 - $300,000 = $200,000

Segment margin of the mobile phone division is:

= contribution margin of the mobile phone division - traceable fixed costs of the mobile phone division

= $600,000 - $200,000 = $400,000