Question

SegR-6268 Corporation has two divisions, East and West. The following information was taken from last year's income statement segmented by division:

East Division West Division
Sales $3,400,000 $2,100,000
Contribution margin $1,500,000 $900,000
Divisional segment margin $1,000,000 $300,000

Net operating income last year for SegR-1882 Corporation was $550,000. In last year's income statement segmented by division, what were SegR-6268's total common fixed expenses?

Answer 1

Answer: $750,000

Explanation:

Total Fixed expenses is the difference between the segment margin and the net income.

The common fixed cost would therefore be:

=Combined segment margin - Net income for the corporation

= (1,000,000 + 300,000) - 550,000

= 1,300,000 - 550,000

= $750,000