Segment profitability analysis obj. 4 The marketing segment sales for Caterpillar, Inc., for a recent year follow:

Caterpillar, Inc.

Machinery and Engines Marketing Segment Sales

(in millions)

Building Construction Products Cat Japan Core Components Earthmoving Electric Power Excavation Large Power Systems Logistics Marine &

Petroleum Power Mining Turbines Sales $2,217 $1,225 $1,234 $5,045 $2,847 $4,562 $2,885 $659 $2,132 $3,975 $3,321 In addition, assume the following information:

Building Construction Products Cat Japan Core Components Earthmoving Electric Power Excavation Large Power Systems Logistics Marine &

Petroleum Power Mining Turbines Variable cost of goods sold as a percent of sales . . . . . . 45% 55% 49% 51% 54% 52% 53% 50% 50% 52% 48%

Dealer commissions as a percent of sales . . . . . . . . . . 9% 11% 8% 8% 10% 6% 5% 10% 9% 7% 9%

Variable promotion expenses (in millions) . . . . . 310 120 150 600 200 600 300 75 270 480 400

a. Use the sales information and the additional assumed information to prepare a contribution margin by segment report. Round to two decimal places. In addition, calculate the contribution margin ratio for each segment as a percentage, rounded to one decimal place.

b. Prepare a table showing the manufacturing margin, dealer commissions, and variable promotion expenses as a percent of sales for each segment. Round whole percents to one decimal place.

c. Use the information in

(a) and

(b) to interpret the segment performance.