Sales revenue $4,580,000
Uncontrollable fixed costs traceable to the division 1,360,000
Allocated corporate overhead 590,000
Controllable fixed costs traceable to the division 1,120,000
Variable costs 40% of revenue
Required:
A. Compute the following for the Ohio Division:
1. Segment contribution margin. 4580000-40% of 4580000 = 2748000
2. Controllable profit margin. 2748000 - 1120000 - 590000 = 1038000
3. Segment profit margin. 1038000 - 1360000 = -322000
B. Which of the three preceding measures should be used when evaluating the Ohio Division as an investment of MWI's resources? Why?
C. Assume that management made the decision to use a segmented income statement that reflected Ohio's five operating departments. Would all $1,120,000 of the controllable fixed costs be easily traced to the departments? Briefly explain.