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Home > Accounting > Question

In variable costing, how is segment margin calculated:

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A) Sales - Variable costs only
B) Sales - Total expenses (variable + fixed)
C) Contribution margin - Traceable fixed costs
D) Contribution margin - Common fixed costs

Correct Answer: C) Contribution margin - Traceable fixed costs

• In variable costing, the segment margin is precisely calculated as Contribution margin - Traceable fixed costs. • The basic Contribution Margin is mathematically defined as total Sales minus Variable costs. • Traceable fixed costs are highly specific to one segment and would disappear if the Segment is eliminated. • Common fixed costs exist to support the overall corporation and are completely ignored when calculating Segment margin.

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