Question

Johns Company operates in three different industries each of which is appropriately regarded as a reportable segment. Segment No. 1 contributed 60 percent of Johns Company's total sales. Sales for Segment No. 1 were $500,000 and total variable costs were $400,000. Total common costs for all segments were $320,000. Johns allocated common costs based on the ratio of each segment's sales to the total sales. What should be the contribution margin presented for Segment No. 1?

Answer 1

Answer:

$100,000

Explanation:

Contribution Margin=Sales Revenue − Variable Costs

For segment 1

Sales = $500,000

Variable costs = $400,000

Contribution Margin = $100,000

Therefore the contribution margin presented for segment number 1 is $100,000 while the attributable common cost for segment 1 will be (0.6*320,000) = $192,000