Nolan Company has two segments: Audio and Video.Sales for the Audio Segment were $500,000,and variable costs were 40% of sales.The Video Segment also had sales of $500,000,but variable costs were 60% of sales.Fixed costs directly traceable to the Audio and Video segments were $150,000 and $120,000,respectively.Common fixed costs of $200,000 were arbitrarily allocated equally to each segment.
What was the segment margin of the Video Segment?
A)$200,000
B)$ 80,000
C)$(20,000)
D)$ 150,000

Question

Nolan Company has two segments: Audio and Video.Sales for the Audio Segment were $500,000,and variable costs were 40% of sales.The Video Segment also had sales of $500,000,but variable costs were 60% of sales.Fixed costs directly traceable to the Audio and Video segments were $150,000 and $120,000,respectively.Common fixed costs of $200,000 were arbitrarily allocated equally to each segment. ​
What was the segment margin of the Video Segment?
A)$200,000
B)$ 80,000
C)$(20,000)
D)$ 150,000

Quizplus · Accepted Answer

Segment Margin = Sales - Variable Costs - Direct Fixed Costs
For the Audio Segment:
Segment Margin = $500,000 - ($500,000 * 40%) - $150,000 = $200,000

For the Video Segment:
Segment Margin = $500,000 - ($500,000 * 60%) - $120,000 = $80,000

Therefore, the segment margin of the Video Segment is $80,000, which is option B.

Nolan Company Has Two Segments: Audio and Video