Segment Analysis Winston Sylvester Corporation is a brokerage and financial serv
ID: 2448034 • Letter: S
Question
Segment Analysis Winston Sylvester Corporation is a brokerage and financial service company. The company recently provided information about its major business segments as follows (in millions): Investor Services Institutional Services Revenues $2,900 $1,553 Income from operations 1,016 188 Depreciation 99 56 a. The segment serves the retail customer, you and me. These include brokerage, Internet, and mutual fund services. The segment includes the same services provided for financial institutions, such as banks, mutual fund managers, insurance companies, and pension plan administrators. b. Estimate the contribution margin for each segment, assuming depreciation represents the majority of fixed costs. Investor Services (in millions) Institutional Services (in millions) Estimated contribution margin $ $
Explanation / Answer
Answer:a The “Investor Services” segment serves the retail customer, you and me. These are the brokerage, Internet, and mutual fund services used by individual investors. The “Institutional Services” segment includes the same services provided for financial institutions,such as banks, mutual fund managers, insurance companies, and pension plan administrators.
Answer:b Variable costs in the “Investor Services” segment include:
1. Commissions to brokers
2. Fees paid to exchanges for executing trades
3. Transaction fees incurred by Schwab mutual funds to purchase and sell shares
4. Advertising
Fixed costs in the “Invest or Services” segment include:
1. Depreciation on brokerage offices
2. Depreciation on brokerage office equipment, such as computers and computer networks
3. Property taxes on brokerage offices.
Answer:c
Particulars Investor services (in millions) Institutional Services (in millions) Income from operations 1016 188 Add: Depreciation 99 56 Estimated Contribution margin 1115 244