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Calculating the segment margin in the given case

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Wonder Inc.'s income statement for June is given below:

Total Division F Division L
Sales $400,000 $220,000 $180,000
Variable Expenses 204,000 132,000 72,000
Contribution Margin 196,000 88,000 108,000
Traceable fixed expenses 127,000 55,000 72,000
Segment Margin 69,000 33,000 36,000
Common fixed expense 35,000
Net operating income 34,000

During June, the sales clerks in Division F received salaries totaling $35,000. Assume that during July the salaries of these sales clerks are discontinued and instead they are paid a commission of 18% of sales. If sales in Division F increase by $65,000 as a result of this change, the July segment margin for Division F should be:

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Solution describes the steps to calculate segment margin in the given case.

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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