RESPONSIBILITY ACCOUNTING

SEGMENTED INCOME STATEMENT

TOTAL/DIVISION SEGMENT 1 SEGMENT 2
Sales xxx xxx xxx
Variable Expenses (xxx) (xxx) (xxx)
Contribution Margin xxx xxx xxx
Traceable Fixed Expenses (xxx) (xxx) (xxx)
Segment Margin xxx xxx xxx
Common Fixed Expenses (xxx)
Net Operating Income / Profit Margin xxx

FORMULAS:
Return on Investment = Operating Income / Operating Assets
Operating Income = Operating Assets * Return on Investments
Operating Assets = Operating Income / Return on Investments
Residual Income = Net Operating Income - (Average Operating Assets * Minimum Required Rate of Return)
Minimum Required Rate of Return = (Operating Income - Residual Income) / Operating Assets
Sales = Average Operating Assets * Turnover
Sales Margin = Net Operating Income / Sales
Turnover = Sales / Average Operating Assets
Return on Investment = Sales Margin * Turnover

TRANSFER PRICING
AT CAPACITY:
Selling Division Buying Division
Minimum TP = VC + (SP-VC-AC) * Units Given Up
Maximum TP </= Purchase Price from Outside
Units Transferred

BELOW CAPACITY:

Selling Division Buying Division

Minimum TP = VC - Avoidable Cost Maximum TP </= Purchase Price from Outside