Consider the following portion of a segmented income statement for the year just ended. Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses. What is X's divisional segment margin?
A) $(10,000)
B) $40,000
C) $10,000
D) $100,000

Question

Consider the following portion of a segmented income statement for the year just ended. Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses.  What is X's divisional segment margin?
A) $(10,000) 
B) $40,000 
C) $10,000 
D) $100,000

Quizplus · Accepted Answer

To calculate divisional segment margin, we need to subtract the variable expenses and fixed expenses of the division from the segment revenue. 
Division X's segment revenue is $50,000. 
Variable expenses are $20,000. 
Fixed expenses are $30,000 direct expenses plus $10,000 allocated common expenses. 
So, divisional segment margin for X is: 
$50,000 - $20,000 - $30,000 - $10,000 = $10,000

Consider the Following Portion of a Segmented Income Statement for the Year