4. The vending market has a negative segment margin. If sales can’t
be increased enough in future months to permit the market to
cover its own costs, then consideration should be given to elimi-
nating the market. (Instructor’s note: The question of elimination
Case 12-33 (continued)
Product C Vending Mar-
ket Home Market
Amount % Amount % Amount %
Sales ... $500,000 100 $ 50,000 100 $450,000 100.0
Less variable expenses:
Production... 100,000 20 10,000 20 90,000 20.0
Selling... 50,000 10 14,000 28 36,000 8.0
Total variable expenses ... 150,000 30 24,000 48 126,000 28.0
Contribution margin... 350,000 70 26,000 52 324,000 72.0
Less traceable fixed expenses:
Selling... 75,000 15 45,000 90 30,000 6.7
Market segment margin ... 275,000 55 $(19,000) (38) $294,000 65.3
Less common fixed expenses not
traceable to market segments:
Production... 160,000 32
Selling*... 25,000 5
Total common fixed expenses... 185,000 37
Product segment margin ... $ 90,000 18
*Total fixed selling expenses ... $100,000
Less fixed selling expenses traceable to the markets .... 75,000
Case 12-34 (45 minutes)
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