Question

The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions: Restin, Inc. Los Angeles Division Bay Area Division Central Valley Division
Revenues $ 856,000 $ 232,000 $ 267,000 $ 357,000
Variable operating expenses 467,600 127,600 140,000 200,000
Controllable fixed expenses 222,000 69,000 79,000 74,000
Noncontrollable fixed expenses 72,000 19,000 24,000 29,000
In addition, the company incurred common fixed costs of $19,200.
Assume that the Los Angeles division increases its promotion expense, a controllable fixed cost, by $10,000. As a result, revenues increase by $50,000.
Required:
1. If variable expenses are tied directly to revenues, the new Los Angeles segment profit margin is ___________.

Answer 1

Answer:

If variable expenses are tied directly to revenues, the new Los Angeles segment profit margin is $126,900

Explanation:

In order to calculate  the new Los Angeles segment profit margin, we would have the following formula:

Contribution margin=Los Angeles Division  Revenues-Variable Operating Expenses

Los Angeles Division  Revenues= $ 232,000 + $50,000=$282,000

Variable Operating Expenses=($127,600 x $282,000) /$ 232,000

Variable Operating Expenses=$155,100

Contribution margin=$282,000 -$155,100

Contribution margin = $126,900

If variable expenses are tied directly to revenues, the new Los Angeles segment profit margin is $126,900

Answer 2

Answer:

$56400

Explanation:  

Segment margin is the profit generated by a particular segment of an organization , calculated by deducting the variable , controllable and the non controllable expenses from the sale revenue generated

                          Restin   Los Angeles    Bay Area   Central Valley

Revenue           906000     282000        267000         357000

Variable Ope.   467600     127600         140000          200000

Controllable      232000     79000          79000            74000

N. Controllable  72000        19000          24000            29000

Profit Margin     134400      56400          24000           54000