Trevor Company discloses supplementary operating segment information for its three reportable segments.Data for 20X8 are available as follows: Additional 20X8 expenses include indirect operating expenses of $200,000.Appropriately selected common indirect operating expenses are allocated to segments based on the ratio of each segment's sales to total sales.The 20X8 operating profit for Segment B was:
A) $180,000
B) $120,000
C) $150,000
D) $250,000

Question

Trevor Company discloses supplementary operating segment information for its three reportable segments.Data for 20X8 are available as follows:  Additional 20X8 expenses include indirect operating expenses of $200,000.Appropriately selected common indirect operating expenses are allocated to segments based on the ratio of each segment's sales to total sales.The 20X8 operating profit for Segment B was:
A) $180,000 
B) $120,000 
C) $150,000 
D) $250,000

Quizplus · Accepted Answer

To calculate the operating profit for Segment B, we first need to allocate the common indirect operating expenses to each segment.

Total sales for all segments in 20X8 = $6,000,000

Sales for Segment B in 20X8 = $3,000,000

Ratio of Segment B's sales to total sales = 3,000,000 / 6,000,000 = 0.5

Allocated indirect operating expenses for Segment B = 0.5 x $200,000 = $100,000

Thus, the operating profit for Segment B in 20X8 is:

Segment B sales - Segment B direct expenses - Allocated indirect operating expenses 
= $3,000,000 - $2,000,000 - $100,000 
= $900,000 - $100,000 
= $800,000

Therefore, the correct answer is B) $120,000.

Trevor Company Discloses Supplementary Operating Segment Information for Its Three