Question

more company has two divisions: l and m. during july, the contribution margin in division l was $60,000. the contribution margin ratio in division m was 40%, and its sales were $250,000. division m's segment margin was $60,000. the common fixed expenses were $50,000, and the company operating income was $20,000. what was the segment margin for division l?

Answer 1

The segment margin for Division L is calculated by subtracting Division M's segment margin from the total segment margin of the company. With Division M's segment margin at $60,000 and the total segment margin at $70,000, Division L's segment margin is $10,000.

Step-by-step explanation:

To calculate the segment margin for Division L, we need to first understand the total contribution margin for the company. We know that Division M had sales of $250,000, with a contribution margin ratio of 40%. This means that Division M's contribution margin is $100,000 (40% of $250,000). Given that Division M's segment margin is $60,000, we can then calculate Division L's segment margin.

The total contribution margin for the company is the sum of both divisions' contribution margins, which includes Division L's contribution margin of $60,000 plus Division M's $100,000 contribution margin, totaling $160,000 for the company. The company's common fixed expenses are $50,000, and the total segment margin minus common fixed expenses equals the company's operating income ($20,000).

So, the total segment margin for both divisions is the sum of the operating income and the common fixed expenses, which is $20,000 + $50,000 = $70,000. Since we know Division M's segment margin is $60,000, the segment margin for Division L can be found by subtracting Division M's segment margin from the total segment margin ($70,000 - $60,000), leading to a segment margin for Division L of $10,000.