Question

Assume a company has two divisions, A and B. The company’s overall sales, overall contribution margin ratio, common fixed expenses, and net operating income are $500,000, 48%, $50,000, and $10,000, respectively. Division A has a contribution margin of $180,000. If Division B has traceable fixed expenses of $80,000, then what is Division A’s segment margin? Multiple Choice $80,000 $40,000 $20,000 $60,000

Answer 1

Answer:

$60,000

Explanation:

total sales A + B = $500,000

variable expenses = $260,000

combined contribution margin = $240,000

contribution margin A = $180,000

contribution margin B = $60,000

combined segment margins = $60,000 (= -$20,000 + $80,000)

segment margin B = -$20,000

segment margin A = $80,000

common fixed expenses = $50,000

net income = $10,000

Answer 2

The margin available after a segment has covered all of its costs is known as segment margin. The segment profit margin is $60,000 per segment. As a result, option (d) or (iv) is the proper response.

How do you compute segment margin?

$\text{total sales A + B} = 500,000\\\text{Variable expenses} = 260,000\\\text{Combined contribution margin} = 240,000\\\text{Contribution margin A} = 180,000\\\text{contribution margin B} = 60,000\\\text{combined segment margins} = 60,000 (= - 20,000 + 80,000)\\\text{segment margin B} = - 20,000\\\text{segment margin A} = 80,000\\\text{common fixed expenses} = 50,000\\\text{net income}= 10,000$

For more information about margin segments, refer below

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