Charles Schwab Corporation is one of the more innovative brokerage and financial service companies in the United
Question:
Charles Schwab Corporation is one of the more innovative brokerage and financial service companies in the United States. The company recently provided information about its major business segments as follows (in millions):
| | Investor Services | Institutional Services |
| Revenues | $3,016 | $1,523 |
| Income from operations | 847 | 523 |
| Depreciation | 133 | 54 |
| | | |
A. How does a brokerage company like Schwab define the “Investor Services” and “Institutional Services” segments? Use the Internet to develop your answer.
The segment serves the retail customer, you and me. These are the brokerage, Internet, and mutual fund services used by individual investors. The segment includes the same services provided for financial institutions, such as banks, mutual fund managers, insurance companies, and pension plan administrators
B. Provide a specific example of a variable and fixed cost in the “Investor Services” segment.
Variable costs in the “Investor Services” segment include: Check all that apply.
Depreciation on brokerage office equipment, such as computers and computer networks
Depreciation on brokerage offices
Property taxes on brokerage offices
Commissions to brokers
Fees paid to exchanges for executing trades
Transaction fees incurred by Schwab mutual funds to purchase and sell shares
Fixed costs in the “Investor Services” segment include: Check all that apply.
Depreciation on brokerage office equipment, such as computers and computer networks
Commissions to brokers
Property taxes on brokerage offices
Depreciation on brokerage offices
Fees paid to exchanges for executing trades
Transaction fees incurred by Schwab mutual funds to purchase and sell shares
C. Estimate the contribution margin (in millions) for each segment, assuming depreciation represents the majority of fixed costs.
| | Investor Services | Institutional Services |
| Estimated contribution margin | $_____________ | $________________ |
D. If Schwab decided to sell its “Institutional Services” accounts to another company, estimate how much operating income would decline (in millions). $___________
Expert Answer:
a A brokerage company like Schwab defines the Investor Services and Institutional Service segments a... View the full answer
