Question

Cervetti Corporation has two major business segments-East and West. In July, the East business segment had sales revenues of $390,000, variable expenses of $210,000, and traceable fixed expenses of $46,000. During the same month, the West business segment had sales revenues of $1,060,000, variable expenses of $540,000, and traceable fixed expenses of $203,000. The common fixed expenses totaled $314,000 and were allocated as follows: $157,000 to the East business segment and $157,000 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:

Answer 1

Answer and Explanation:

The preparation of the properly constructed segmented income statement in a contribution format is presented below

Sales $390,000

Less: Variable expense -$210,000

Contribution margin $180,000

Less: Traceable fixed expenses -$46,000

Segment Margin $134,000

For computing the segment margin we deduct the traceable fixed expenses and the variable expenses from the sales revenue so that the segment margin could come