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University Hospital provided the following income statement for two of its divisions: Diagnostic and ...
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University Hospital provided the following income statement for two of its divisions: Diagnostic and ...
University Hospital provided the following income statement for two of its divisions: Diagnostic and Outpatient.
Diagnostic
Outpatient
Total
Revenue
$500,000
$400,000
$900,000
Variable expenses
Product
220,000
140,000
360,000
Selling and administrative
150,000
80,000
230,000
Contribution margin
130,000
180,000
310,000
Less fixed costs
180,000
125,000
305,000
Operating income
($ 50,000)
$ 55,000
$ 5,000
The CEO of the hospital is not pleased with the division's performance, and he believes that the Diagnostic division is responsible for its dismal result and wants to consider outsourcing diagnostic procedures.
Required:
The controller has determined that the hospital's headquarters allocated $98,000 and $32,000 in common administrative fixed costs, respectively, to Diagnostic and Outpatient divisions. Prepare a segment margin income statement that will provide the CEO with a better basis for evaluating the two divisions' performance. Omit the heading.
Textbook
Managerial Accounting
Edition:
4
th
Author:
Davis
Read 51 times
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More solutions for this book are
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Diagnostic: $180,000 − $98,000 = $82,000
Outpatient: $125,000 − $32,000 = $93,000
Diagnostic
Outpatient
Total
Revenue
$500,000
$400,000
$900,000
Variable expenses
Product
220,000
140,000
360,000
Selling and administrative
150,000
80,000
230,000
Contribution margin
130,000
180,000
310,000
Less traceable fixed costs
82,000
93,000
175,000
Segment margin
$ 48,000
$ 87,000
135,000
Common fixed costs
130,000
Net operating income
$ 5,000
1
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pinkkurage
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Brilliant
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This site is awesome
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this is exactly what I needed
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