08-25-2009, 05:08 PM
Uses of Segment Margin Ratio
All Long run decisions are made on the basis of segment margin ratio.
<b>Calculation of segment margin Ratio</b>
Segment Margin/Net Sales*100
<u>Example</u>
Sales......................$50000
less variable cost..........30000
Contribution Margin.........20000
less traceable fixed cost...10000
Segment Margin..............10000
Segment Margin Ratio= 10000/50000*100
=20%
<font color="blue"><b>** Threads merged by Admin. Thread of duplicate nature removed. **</b></font id="blue">
Profitability measure used to evaluate the financial performance of a business segment (i.e., division, territory, product line). It equals segmental revenue less related product costs and traceable operating expenses attributable to that segment.
All Long run decisions are made on the basis of segment margin ratio.
<b>Calculation of segment margin Ratio</b>
Segment Margin/Net Sales*100
<u>Example</u>
Sales......................$50000
less variable cost..........30000
Contribution Margin.........20000
less traceable fixed cost...10000
Segment Margin..............10000
Segment Margin Ratio= 10000/50000*100
=20%
<font color="blue"><b>** Threads merged by Admin. Thread of duplicate nature removed. **</b></font id="blue">
Profitability measure used to evaluate the financial performance of a business segment (i.e., division, territory, product line). It equals segmental revenue less related product costs and traceable operating expenses attributable to that segment.