ABC Company operates two divisions with the following sales and expense information for the month of August:

Question:

Division 1: sales, $120,000; contribution margin ratio, 50%; direct fixed expenses, $24,000.

Division 2: sales, $80,000; contribution margin ratio, 70%; direct fixed expenses, $16,000.

ABC Company’s total fixed expenses during August was $100,000.

Required:

Prepare a segmented income statement for ABC Company to determine the segment margin for Divisions 1 and 2 and the operating income for ABC Company.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...

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