Question: Shirley Inc. has three divisions, King, West and Gold. Following is the income statement for the previous year:
|
King |
West |
Gold |
|
Total |
| Sales |
$ |
1,000,000 |
|
$ |
575,000 |
|
$ |
425,000 |
|
|
$ |
2,000,000 |
| Variable Costs |
|
400,000 |
|
|
345,000 |
|
|
300,000 |
|
|
|
1,045,000 |
| Contribution Margin |
|
600,000 |
|
|
230,000 |
|
|
125,000 |
|
|
|
955,000 |
| Fixed Costs |
|
375,000 |
|
|
215,625 |
|
|
159,375 |
|
|
|
750,000 |
| Profit Margin |
|
225,000 |
|
|
14,375 |
|
|
(34,375 |
) |
|
|
205,000 |
|
Of the fixed costs, $300,000 is for corporate costs and is allocated equally to the three divisions.
a. How much does Gold Division have in direct fixed costs?
b. What is Gold Division's segment margin?
c. What would Shirley's profit margin be if Gold Division were dropped?