Question

Data for January for Bondi Corporation and its two major business segments, North and South, appear below: Sales revenues, North Variable expenses, North Traceable fixed expenses, North Sales revenues, South $660,000 $ 383,000 $ 79,000 $ 510,000 Variable expenses, South $ 291,000 Traceable fixed expenses, South $66,000 In addition, common fixed expenses totaled $179,000 and were allocated as follows: $93,000 to the North business segment and $86,000 to the South business segment. A properly constructed segmented income statement in a contribution format would show that the segment margin of the North business segment is:

Answer 1

Segment Income Statement
	North Segment	South Segment	Total
Sales Revenue	$ 660,000	$ 510,000	$ 1,170,000
Variable expenses	383,000	291,000	674,000
Contribution	277,000	219,000	496,000
Traceable fixed expenses	79,000	66,000	145,000
Segment margin	198,000	153,000	351,000
Common fixed expenses			179,000
Net Income			$ 172,000
Segment margin is calculated from the revenues and expenses that are directly traceable to a segment. It is not recommended include an allocation of corporate overhead in the segment margin calculation, since it obscures the operating results of the segment or such costs are usually irrelevant to the operations of a segment. Segment margin of North business = $ 198,000