Cervetti Corporation has two major business segments-East and West. In July, the
ID: 2497694 • Letter: C
Question
Cervetti Corporation has two major business segments-East and West. In July, the East business segment had sales revenues of $220,000, variable expenses of $125,000, and traceable fixed expenses of $29,000. During the same month, the West business segment had sales revenues of $890,000, variable expenses of $472,000, and traceable fixed expenses of $169,000. The common fixed expenses totaled $246,000 and were allocated as follows: $123,000 to the East business segment and $123,000 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:
$125,000
$66,000
-$28,000
-$57,000
a)$125,000
b)$66,000
c)-$28,000
d)-$57,000
Explanation / Answer
segment margin= segment sales revenue - variable cost-avoidable fixed costs
segment margin=220000- 125000 - 29000=66000
b) is the answer