Consider the following portion of a segmented income statement for the year just ended.Assume that the 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. $\begin{array}{lr}
&\text { Division } X\
\text { Sales } & \$ 100,000 \
\text { Variable manufacturing costs } & \$ 60,000 \
\text { Gross profit } & \$ 40,000\
\text {Fixed expenses (direct and allocated) }&50,000\
\text {Operating income (loss)}&\$(10,000)
\end{array}$ What is X's divisional segment margin?
A)$(10,000)
B)$10,000
C)$40,000
D)$100,000

Question

Consider the following portion of a segmented income statement for the year just ended.Assume that the 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. $\begin{array}{lr}
&\text { Division } X\
\text { Sales } & \$ 100,000 \
\text { Variable manufacturing costs } & \$ 60,000 \
\text { Gross profit } & \$ 40,000\
\text {Fixed expenses (direct and allocated) }&50,000\
\text {Operating income (loss)}&\$(10,000)
\end{array}$  What is X's divisional segment margin?
A)$(10,000)
B)$10,000
C)$40,000
D)$100,000

Quizplus · Accepted Answer

The divisional segment margin is calculated by subtracting the variable costs and direct fixed costs from the sales. Here, Sales ($100,000) - Variable Costs ($60,000) - Direct Fixed Costs ($30,000) = $10,000.

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