Consider the following portion of a segmented income statement for the year just ended.Assume fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses. What is X's divisional segment margin?
A)($10,000)
B)$40,000
C)$10,000
D)$100,000

Question

Consider the following portion of a segmented income statement for the year just ended.Assume fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses.  What is X's divisional segment margin?
A)($10,000) 
B)$40,000 
C)$10,000 
D)$100,000

Quizplus · Accepted Answer

To calculate the divisional segment margin, we need to subtract the fixed expenses (including direct expenses) from the division's contribution margin.

Contribution margin = Sales - Variable expenses
Division X contribution margin = $60,000 - $20,000 = $40,000 
Fixed expenses (including direct expenses) = $70,000 - $40,000 = $30,000

Divisional segment margin = Division X contribution margin - Fixed expenses
Divisional segment margin = $40,000 - $30,000 = $10,000

Therefore, the correct answer is choice C.

Consider the Following Portion of a Segmented Income Statement for the Year