Orderly Headquarters, Inc. has two business segments: Commercial and Residential. The following data have been provided for the year ending December 31, 20XX.
$$\begin{array} { l l l }
& \text { Commercial } & \text { Residential } \
\text { Service Revenue } & \$ 5,900 & \$ 8 , 500 \
\text { Variable costs } & \mathbf { 3 , 5 0 0 } & 5,400
\end{array}$$ The company incurred $1,500 as fixed costs.
Requirements:
a) Prepare the income statement of Orderly Headquarters showing the contribution margin of each segment.
b) Calculate the contribution margin ratio of each segment. Which segment is more profitable and why?

Question

Orderly Headquarters, Inc. has two business segments: Commercial and Residential. The following data have been provided for the year ending December 31, 20XX.
 $$\begin{array} { l l l } 
& \text { Commercial } & \text { Residential } \
\text { Service Revenue } & \$ 5,900 & \$ 8 , 500 \
\text { Variable costs } & \mathbf { 3 , 5 0 0 } & 5,400
\end{array}$$ The company incurred $1,500 as fixed costs.
Requirements:
a) Prepare the income statement of Orderly Headquarters showing the contribution margin of each segment.
b) Calculate the contribution margin ratio of each segment. Which segment is more profitable and why?

Quizplus · Accepted Answer

The Answer of Orderly Headquarters, Inc. has two business segments: Commercial and Residential. The following data have been provided for the year ending December 31, 20XX.
 $$\begin{array} { l l l } 
& \text { Commercial } & \text { Residential } \
\text { Service Revenue } & \$ 5,900 & \$ 8 , 500 \
\text { Variable costs } & \mathbf { 3 , 5 0 0 } & 5,400
\end{array}$$ The company incurred $1,500 as fixed costs.
Requirements:
a) Prepare the income statement of Orderly Headquarters showing the contribution margin of each segment.
b) Calculate the contribution margin ratio of each segment. Which segment is more profitable and why?

Orderly Headquarters, Inc The Company Incurred $1,500 as Fixed Costs