Segment Income
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Dallas Market
Construction Clients Landscaping clients
Sales $600,000 100% $400.000 100% $200,000 100%
Variable expenses 360,000 60% 260,000 65% 100,000 50%
Contribution margin 240,000 40% 140,000 35 100,000 50%
Traceable fixed expenses 72,000 12 20,000 5 52,000 26
Market segment margin 168,000 28 120,000 30% $48,000 24%
Common fixed expenses
not traceable to markets 18,000 3
Office segment margin 150,000 25%
The company would like to initiate an intensive advertising
campaign in one of the two markets during the next month.
The campaign would cost $8,000. Marketing studies indicate
that such a campaign would increase sales in the contruction
market by $70,000 or increase sales in the landscaping
market by $60,000.
1. In which of the markets would you recommend that the
company focus its advertising campaign? Show computations
to support your answer
2. If Dallas once showed $90,000 in traceable fixed expenses,
what happened to the $90,000 in this example?
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Solution Summary
The solution contains the computation of segment margin.
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