Total Division L Division M

Sales 250,000.00
Less: VC 150,000.00
CM 160,000.00 60,000.00 100,000.00
Less: Traceable FC 90,000.00
Segment Margin 70,000.00
Less: Common FC 50,000.00
Net Income 20,000.00
 Total Store J
Sales 450,000
Sales J (100,000/40%) 250,000
Sales K (30,000/15%)
Variable Costs 280,000 150,000
Contribution Margin 170,000 100,000
Traceable Fixed Costs 100,000 60,000
Segment Margin 70,000 40,000
Common Fixed Cost 40,000
Net Income 30,000

Total Fixed cost

Traceable Fixed Costs 100,000
Common Fixed Cost 40,000
Total Fixed cost 140,000

Segment Ratio 16%

Store K

200,000
130,000
70,000
40,000
30,000

15%
 Total North South
Sales 437,500 250,000 187,500
Variable Costs 362,500 200,000 162,500
Contribution Margin 75,000 50,000 25,000
Traceable Fixed Costs 25,000 15,000 10,000
Segment Margin 50,000 35,000 15,000
Common Fixed Cost 24,000
Net Income 26,000

Total Fixed cost

Traceable Fixed Costs 25,000
Common Fixed Cost 24,000
Total Fixed cost 49,000

Segment Ratio
 Units 15,000 16,000
Total Total Operating Asset 750,000
Sales 750,000 800,000
Variable Costs 450,000 480,000
Contribution Margin 300,000 320,000
Total Fixed Cost 200,000 200,000
Net Income 100,000 120,000

Residual Income
Operating Income 100,000
Minimum Rate of return 12%
Operating Asset 750,000

1 10,000

120,000
750,000

2 16%

165,000 NI 165,000
3 22% 750,000 FC 200,000
CM 365,000 18,250
 22%

RI 45,000
Operating Income ?
Min rate of return 12%
Operating Asset 750,000 90,000 NI
FC
CM
45000 = x-(12%*750000)
135,000
200,000
335,000 16750
 Total
Sales 200,000
Variable Costs
Contribution Margin
Total Fixed Cost
Net Income 25,000 12.50%

Residual Income 13,000

Operating Income 25,000
Minimum Rate of return
Operating Asset 100,000

25,000
100,000 25%
2 25%

4 Residual Income 13,000

Operating Income 25,000
Operating Asset 100,000 12,000 12%
 25,000
200,000 12.50%

200,000
100,000 2