Question

Carter Industries has two divisions: the West Division and the East Division. Information relating to the divisions for the year just ended is as follows: West East Units produced and sold 36,000 46,000 Selling price per unit$6 $13 Variable costs per unit 3 3 Direct fixed cost 54,000 116,000 Common fixed cost 46,000 46,000 Common fixed expenses have been allocated equally to each of the two divisions. Carter's segment margin for the West Division is______________.

Answer 1

Answer:

$54,000

Explanation:

The computation of the segment margin for the West Division is shown below:

First we have to find the contribution margin which is as follows

= Number of units sold × (Selling price per unit - variable cost per unit)

= 36,000 × ($6 - $3)

= 36,000 × $3

= $108,000

Now the segment margin is

= Contribution margin - direct fixed cost

= $108,000 - $54,000

= $54,000