Question

Tubaugh Corporation has two major business segments--East and West. In December, the East business segment had sales revenues of $380,000, variable expenses of $205,000, and traceable fixed expenses of $45,000. During the same month, the West business segment had sales revenues of $1,050,000, variable expenses of $536,000, and traceable fixed expenses of $201,000. The common fixed expenses totaled $310,000 and were allocated as follows: $155,000 to the East business segment and $155,000 to the West business segment. A properly constructed segmented income statement in a contribution format would show that the segment margin of the East business segment is:____________.
a. $205,000
b. $130,000
c. $(23,000)
d. $(20,000)

Answer 1

Answer:

b. $130,000

Explanation:

The contribution margin income statement is presented below

Particulars                   Total company              East              West

Sales                             $1,430,000                 $380,000      $1,050,000

Less: variable expense -$741,000                 -$205,000     -$536,000

Contribution margin      $689,000                 $175,000        $514,000

Less: fixed expense       -$246,000               -$45,000        -$201,000

Segment margin             $443,000                  $130,000     $313,000

Less: common fixed expense $310,000

Operating income             $133,000