(a)
Concept Introduction:
Segment analysis is analyzing the business which is divided into segments in regard to determine the more profitable and less profitable business segments and the potential of business to grow in the market.
Retail Investor: A retail investor is an individual person who buys and sells the securities for personal, not for an organization.
Advisor Services: It is a type of consulting services in which an authorized person develops findings and recommendation that are presented to the client for consideration.
To find out:
The difference between the Investor (Retail) Services and Advisor Services segments.
(b)
Concept Introduction:
Segment analysis is analyzing the business which is divided into segments in regard to determine the more profitable and less profitable business segments and the potential of business to grow in the market.
Variable cost: A variable cost is the cost which varies from production size as like, direct material, and production charges etc.
Fixed cost: A fixed cost is the cost which remains same even with change in production volume. The total cost of the product contains variable cost, fixed cost and semi-variable cost.
To provide:
The example for variable and fixed cost in the segment of "Investor (Retail) Services".
(c)
Concept Introduction:
Contribution Margin: Contribution margin is the net of sale from variable cost i.e. selling price per unit minus variable cost per unit. The contribution is like as revenue which is not consumed by variable cost.
To find out:
The contribution margin for each segment.
(d)
Concept Introduction:
Contribution Margin: Contribution margin is the net of sale from variable cost i.e. selling price per unit minus variable cost per unit. The contribution is like as revenue which is not consumed by variable cost.
To find out:
The decline in operating income if it decides to sell the advisory services to another company.
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Chapter 12 Solutions
Survey of Accounting (Accounting I)
- Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Required:1. Compute the companywide break-even point in dollar sales.2. Compute the break-even point in dollar sales for the East region.3. Compute the break-even point in dollar sales for the West region.4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. Use the same format as shown above. What is Crossfire’s net operating income (loss) in your new segmented income statement?5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region? Why?arrow_forwardCompanywide and Segment Break-Even Analysis Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown below: Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the North region. 3. Compute the break-even point in dollar sales for the South region.arrow_forwardUse the following information to answer #7 and # 8 An investment banker is analyzing two companies as possible investments, but is concerned about the impact that each company's cost structure might have on its profitability. The following CVP income statements are available for Chantal Corp. and Mantle, Inc. Chantal Corp. Mantle, Inc. Sales revenue $700,000 $700,000 Variable costs 350,000 487,500 Contribution margin 350,000 212,500 Fixed costs 225.000 87,500 Net income $125,000 $125.000 If sales decrease by 20% for each company, the impact on net income will be: a decrease of 10% for Chantal and a decrease of 14% for Mantle. O a decrease of 20% for Chantal and a decrease of 20% for Mantle. O a decrease of 56% for Chantal and a decrease of 34% for Mantle. O a decrease of 56% for Chantal and a decrease of 78% for Mantle.arrow_forward
- Companywide and Segment Break-Even Analysis Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the East region. 3. Compute the break-even point in dollar sales for the West region. 4. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. Use the same format as shown above. What is Crossfire’s net operating income (loss) in your new segmented income statement? 5. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region? Why?arrow_forwardSegment Profitability Analysis The marketing segment sales for Caterpillar Inc. (CAT) for a recent year follow: Caterpillar Inc.Machinery and Engines Marketing Segment Sales(in millions) BuildingConstructionProducts CatJapan CoreComponents Earthmoving ElectricPower Excavation LargePowerSystems Logistics Marine &PetroleumPower 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: BuildingConstructionProducts CatJapan CoreComponents Earthmoving ElectricPower Excavation LargePowerSystems Logistics Marine &PetroleumPower 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…arrow_forwardConsider a telecommunication service provider. You have the following quarterly data: STATISTICS TYPICAL CONSUMER Number of referrals per period (n=n1+ n2) 5 of which, customers that joined due to the referral (n1) 3 of which, customers that would have joined anyway (n2) 2 Marketing cost per period (Mty) $30 Average gross margin (Aty) $78 Cost of referral (aty) $15 Acquisition cost savings (ACQ1ty and ACQ2ty) $10 Yearly discount rate (r) 15% Calculate CRV of a typical customer for one year (over 4 quarters).arrow_forward
- Segment Contribution Margin Analysis The operating revenues of the three largest business segments for Time Warner, Inc., for a recent year follow. Each segment includes a number of businesses, examples of which are indicated in parentheses.arrow_forwardCurrent Attempt in Progress Some financial information for each of three companies is reflected below in columns A, B, and C. Use your knowledge of CVP relationships to fill in the missing pieces numbered (1) through (9). Consider each company (i.e., column) separately. (Round variable cost per unit and contribution margin ratio to 2 decimal places, e.g. 0.24.) Selling price Total fixed costs Sales volume (units) Variable cost/unit Operating income Tax rate After-tax profit Contribution margin ratio A $6 $13,100 29,000 $40,840 (1) % (2) $28,588 (3) B $800 2,500 $384 25% $684,375 (4) (5) (6) с $389,000 $30.24 $229,240 40% 0.64arrow_forwardRequired information [The following information applies to the questions displayed below] Nation's Capital Fitness, Inc., operates a chain of fitness centers in the Washington, D.C., area. The firm's controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of the high-low method to develop an equation, in the form of Y=a+bX, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows: Month January February March April May June July August September October November December Total Average "Rounded Hours of Maintenance Service 530 470 260 470 360 450 330 450 470 380 360 360 4,890 408- Maintenance Costs $ 5,068 4,220 2,800 4,330 2,970 4,140 3,100 3,510 4,010 3,200 3,250 3,040 $43,638 $ 3,637 Required: 1. Using the high-low method of cost estimation, estimate the behavior of the…arrow_forward
- Analyze Star Stream’s cost-volume-profit relationships Star Stream is a subscription-based video streaming service. Subscribers pay $120 per year for the service. Star Stream licenses and develops content for its subscribers. In addition, Star Stream leases servers to hold this content. These costs are not variable to the number of subscribers, but must be incurred regardless of the subscriber base. In addition, Star Stream compensates telecommunication companies for bandwidth so that Star Stream customers receive fast streaming services. These costs are variable to the number of subscribers. These and other costs are as follows: Enter your answers in whole dollars. Server lease costs per year $ 100,000,000 Content costs per year 2,000,000,000 Fixed operating costs per year 900,000,000 Bandwidth costs per subscriber per year 15 Variable operating costs per subscriber per year 25 a. Determine the break-even number of subscribers. b. Assume Star Stream planned to…arrow_forwardAnalyze Star Stream’s cost-volume-profit relationships Star Stream is a subscription-based video streaming service. Subscribers pay $120 per year for the service. Star Stream licenses and develops content for its subscribers. In addition, Star Stream leases servers to hold this content. These costs are not variable to the number of subscribers, but must be incurred regardless of the subscriber base. In addition, Star Stream compensates telecommunication companies for bandwidth so that Star Stream customers receive fast streaming services. These costs are variable to the number of subscribers. These and other costs are as follows: Enter your answers in whole dollars. Line Item Description Amount Server lease costs per year $ 100,000,000 Content costs per year 2,000,000,000 Fixed operating costs per year 900,000,000 Bandwidth costs per subscriber per year 15 Variable operating costs per subscriber per year 25 a. Determine the break-even number of subscribers.fill in the…arrow_forwardh 3. The operating revenues of the three largest business segments for Time Warner, Inc., for a recent year follow. Each segment includes a number of businesses, examples of which are indicated in parentheses. Segment Revenues (in millions) Time Warner Inc. Turner (cable networks and digital media) Home Box Office (pay television) Warner Bros. (films, television, and videos) Segment Assume that the variable costs as a percent of sales for each segment are as follows: Turner Home Box Office Warner Bros. $10,596 5,615 12,993 Percentage 37% 33% 30% a. Determine the contribution margin (round to whole millions) and contribution margin ratio (round to whole percentages) for each segment from the information given. b. Does the segment with the highest contribution margin in (a) mean that it is the most profitable segment with the highest operating income?arrow_forward
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