Hamilton,Inc.has two divisions,Parker and Blaine.Following is the income statement for the previous year: Of the total fixed costs,$600,000 are common fixed costs that are allocated equally between the divisions.What is Parker's segment margin?

A)$150,000
B)$450,000
C)$600,000
D)$1,200,000

Question

Hamilton,Inc.has two divisions,Parker and Blaine.Following is the income statement for the previous year: Of the total fixed costs,$600,000 are common fixed costs that are allocated equally between the divisions.What is Parker's segment margin?

A)$150,000 
B)$450,000 
C)$600,000 
D)$1,200,000

Quizplus · Accepted Answer

To find Parker's segment margin, we need to subtract Parker's direct expenses from Parker's revenue:

Parker's revenue: $4,000,000 
Parker's direct expenses: $2,200,000

Parker's segment margin (before common fixed costs): $1,800,000

Since $600,000 of fixed costs are common fixed costs allocated equally between the divisions, Parker's share of the common fixed costs would be $300,000.

Parker's segment margin (after common fixed costs): $1,500,000

Therefore, the correct choice is B) $450,000.