The Following Selected Data Relate to the Idaho Division of Far

question 46

Essay

The following selected data relate to the Idaho Division of Far West Enterprises (FWE): $$\begin{array} { l r } \text { Sales revenue } & \$ 4,580,000 \\\text { Uncontrollable fixed costs traceable to the division } & 1,360,000 \\\text { Allocated corporate overhead } & 590,000 \\\text { Controllable fixed costs traceable to the division } & 1,120,000 \\\text { Variable costs } & 40 \% \text { of revenue }\end{array}$$
Required:
A. Compute the following for the Idaho Division:
1. Segment contribution margin.
2. Controllable profit margin.
3. Segment profit margin.
B. Which of the three preceding measures should be used when evaluating the Idaho Division as an investment of FWE's resources? Why?
C. Assume that management made the decision to prepare a segmented income statement that reflected Idaho's five operating departments. Would all $1,120,000 of the controllable fixed costs be easily traced to the departments? Briefly explain.
D. Which of the five-dollar amounts presented in the body of the problem would be used in computing the income before taxes of Far West Enterprises?

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Definitions:

Discount Rate

The interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility.

Money Market Instruments

Short-term financial instruments that are highly liquid and designed for cash management by investors, including treasury bills, commercial paper, and certificates of deposit.

Government Bond

Securities issued by governments to finance public expenditure, typically with a promise of future repayment and interest payments.

State Income Taxes

Taxes levied by individual states on the income of residents and businesses within their jurisdiction.