Apps M MGMT-131-SB01D) Severo S.A. of Sao Paulo, Brazil, is organized into two d

Question

Apps M MGMT-131-SB01D) Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Divisions Total Company Cloth Leather Sales R 4,500,000 R 2,500,000 R 2,000,000 2,024,800 1,090,000 934,800 Variable expenses Contribution margin Traceable fixed expenses 2475.200 1,410,000 1,065.200 821,000 570,000 430,000 340,000 128,000 391,000 230,000 127,000 Advertising Selling and administrative Depreciation Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income 1,646,000 898.000 748,000 829.200 R 512,000 R 317,200 403,000 R 426,200 Top management can't understand why the Leather Division has such a low segment margin when its sales are only 20% less than sales in the Cloth Division As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division 0 Type here to search

Explanation / Answer

ans 1 Leather Division Product Lines Garments Shoes Handbags Total   Sales 630,000 830,000 540,000 2,000,000 Less: variable Expenses as a % of sales 378,000 249,000 307,800 934,800 Contribution margin 252,000 581,000 232,200 1,065,200   Traceable fixed expenses:      Advertising 93,000 125,000 173,000 391,000      Selling and administrative 43,000 48,000 45,000 136,000      Depreciation 32,000 69,000 26,000 127,000   Total Traceable fixed expenses 168,000 242,000 244,000 654,000 Segment Margin 84,000 339,000 -11,800 411,200 Less: common Fixed Expenses 94,000 Opearting Income of Leather Division 317,200   Variable expenses as a percentage of sales 60 30 57 % ans 2 Handbag Markets Domestic Foreign Total   Sales 390,000 150,000 540,000 Less: variable Expenses 202,800 105,000 307,800 Contribution margin 187,200 45,000 232,200   Traceable fixed expenses: 0      Advertising 53,000 120,000 173,000 Handbag Market Segment Margin 134,200 -75,000 59,200 Less:Common Fixed Expenses(45000+26000) 71,000 Operating Loss of Handbag -11,800   Variable expenses as a percentage of sales 52 70 %

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