Cervetti Corporation has two major business segments-East and West. In July, the East business segment had sales revenues of $220,000, variable expenses of $125,000, and traceable fixed expenses of $29,000. During the same month, the West business segment had sales revenues of $890,000, variable expenses of $472,000, and traceable fixed expenses of $169,000. The common fixed expenses totaled $246,000 and were allocated as follows: $123,000 to the East business segment and $123,000 to the West business segment. A properly constructed segmented income statement in a contribution format would show that the segment margin of the East business segment is:
A)$125,000
B)$66,000
C)-$28,000
D)-$57,000

Question

Quizplus · Accepted Answer

To find the segment margin of the East business segment, we need to subtract its total variable and traceable fixed expenses from its sales revenues.

Segment margin = Sales revenues - Variable expenses - Traceable fixed expenses

For the East business segment: 
Segment margin = $220,000 - $125,000 - $29,000 = $66,000

Therefore, the correct choice is B) $66,000.

Cervetti Corporation Has Two Major Business Segments-East and West