Cervetti Corporation has two major business segments-East and West. In July, the

Question

Cervetti Corporation has two major business segments-East and West. In July, the East business segment had sales revenues of $410,000, variable expenses of $220,000, and traceable fixed expenses of $48,000. During the same month, the West business segment had sales revenues of $1,080,000, variable expenses of $548,000, and traceable fixed expenses of $207,000. The common fixed expenses totaled $322,000 and were allocated as follows: $161,000 to the East business segment and $161,000 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:

$220,000

$142,000

$(29,000)

$(31,000)

Cervetti Corporation has two major business segments-East and West. In July, the East business segment had sales revenues of $410,000, variable expenses of $220,000, and traceable fixed expenses of $48,000. During the same month, the West business segment had sales revenues of $1,080,000, variable expenses of $548,000, and traceable fixed expenses of $207,000. The common fixed expenses totaled $322,000 and were allocated as follows: $161,000 to the East business segment and $161,000 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:

Explanation / Answer

The correct answer is $ 142,000

Note :

East Sales 4,10,000 Less :Variable expenses 2,20,000 Contribution margin 1,90,000 Less :Traceable fixed expenses 48,000 Segment Margin 1,42,000

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