Carter Industries has two divisions: the West Division and the East Division. Information relating to the divisions for the year just ended is as follows:
$\begin{array}{lrr}
&\text { West}& \text { East }\
\text {Units produced and sold } &30,000&40,000\
\text {Selling price per unit } &\$8&\$15\
\text { Variable costs per unit } &3&15\
\text { Direct fixed cost } &48,000&110,000\
\text { Common fixed cost } &40,000&40,000\
\end{array}$

Common fixed expenses have been allocated equally to each of the two divisions. Carter's segment margin for the West Division is:
A) $150,000.
B) $102,000.
C) $30,000.
D) $110,000.

Question

Carter Industries has two divisions: the West Division and the East Division. Information relating to the divisions for the year just ended is as follows:
$\begin{array}{lrr}
&\text { West}& \text { East }\
  \text {Units produced and sold   } &30,000&40,000\
 \text {Selling price per unit  } &\$8&\$15\
 \text { Variable costs per unit  } &3&15\
 \text {  Direct fixed cost  } &48,000&110,000\
 \text { Common fixed cost } &40,000&40,000\
\end{array}$

Common fixed expenses have been allocated equally to each of the two divisions. Carter's segment margin for the West Division is:
A) $150,000.
B) $102,000.
C) $30,000.
D) $110,000.

Quizplus · Accepted Answer

Segment margin is calculated as the difference between sales revenue and variable costs plus direct fixed costs. For the West Division, this is:Sales revenue: 30,000 units * $8 = $240,000Variable costs: 30,000 units * $3 = $90,000Direct fixed costs: $48,000Segment margin: $240,000 - $90,000 - $48,000 = $102,000

Carter Industries Has Two Divisions: the West Division and the East