Keller Company is evaluating its two divisions,North Division and South Division.Data for the North Division include sales of $250,000,variable costs of $125,000,and fixed costs of $200,000,50 percent of which are traceable to the division.Data for the South Division include sales of $300,000,variable costs of $175,000,and fixed costs of $225,000,60 percent of which are traceable to the division.
-Divisional income (or segment margin)for North Division is
A)$(75,000).
B)$25,000.
C)$125,000.
D)$75,000.

Question

Keller Company is evaluating its two divisions,North Division and South Division.Data for the North Division include sales of $250,000,variable costs of $125,000,and fixed costs of $200,000,50 percent of which are traceable to the division.Data for the South Division include sales of $300,000,variable costs of $175,000,and fixed costs of $225,000,60 percent of which are traceable to the division. 
-Divisional income (or segment margin)for North Division is
A)$(75,000).
B)$25,000.
C)$125,000.
D)$75,000.

Quizplus · Accepted Answer

Divisional income or segment margin for North Division is calculated by subtracting both variable costs and traceable fixed costs from sales. For North Division: Sales = $250,000, Variable Costs = $125,000, Traceable Fixed Costs = 50% of $200,000 = $100,000. Thus, Divisional Income = $250,000 - $125,000 - $100,000 = $25,000.

Keller Company Is Evaluating Its Two Divisions,North Division and South