Question

ABC Company operates two divisions with the following sales and expense information for the month of August:

Division 1: sales, $144,000; contribution margin ratio, 50%; direct fixed expenses, $30,000.
Division 2: sales, $98,000; contribution margin ratio, 70%; direct fixed expenses, $19,000.

ABC Company’s total fixed expenses during August was $121,600.

Required:
Prepare a segmented income statement for ABC Company to determine the segment margin for Divisions 1 and 2 and the operating income for ABC Company.

ABC Company operates two divisions with the following sales and expense Information for the month of August: Division 1: sales, $144,000: contribution margin ratio, 50%, direct fixed expenses, $30,000. Division 2: sales, $98,000, contribution margin ratio, 70% direct fixed expenses. $19.000. ABC Company's total fixed expenses during August was $121,600. Required: Prepare a segmented Income statement for ABC Company to determine the segment margin for Divisions 1 and 2 and the operating Income for ABC Company. Total Company Division 1 Division 2 Sales Variable expenses Contribution margin Direct fixed expenses Segment margin Common fixed expenses Operating income

Answer 1

	Total company	Division 1	Division 2
Sales	$242,000	$144,000	$98,000
Variable expenses	$101,400	$72,000 [$144,000*(1-0.5)]	$29,400 [$98,000*(1-0.7)]
Contribution margin	$140,600	$72,000	$68,600
Direct fixed expenses	$49,000	$30,000	$19,000
Segment margin	$91,600	$42,000	$49,600
Common fixed expenses	$72,600 ($121,600-$49,000)
Operating income	$19,000