Question

Max, Inc., has two divisions, South Division and North Division. South Division's sales, contribution margin ratio, and traceable fixed expenses are $500,000, 60%, and $100,000, respectively. What is the segment margin for the South Division

Answer 1

Answer:

$200,000

Explanation:

Segment Margin is Profit wholly controlled by a specific division. Now, this excludes shared costs from the central Head Office.

The segment margin for the South Division is calculated as follows :

Sales                                                             $500,000

Less Variable Costs (40% x $500,000)    ($200,000)

Contribution (60% x $500,000)                 $300,000

Less Traceable Fixed Expenses                ($100,000)

Segment Margin                                          $200,000

Conclusion

The segment margin for the South Division is $200,000