Charles Schwab Corporation is one of the more innovative brokerage and financial service companies in the United States. The company recently provided information about its major business segments as follows (in millions):   Investor Services Advisor Services Revenues $7,321   $2,811   Income from operations 3,176   1,386   Depreciation 186   120     a.  The   segment serves the retail customer, you and me. These include brokerage, Internet, and mutual fund services. The   segment includes the same services provided for financial institutions, such as banks, mutual fund managers, insurance companies, and pension plan administrators. b.  Indicate whether the following costs are a “Variable Cost” or a “Fixed Cost” in the “Investor Services“. 1. Commissions to brokers   2. Fees paid to exchanges for executing trades   3. Depreciation on brokerage offices   4. Transaction fees incurred by Schwab mutual funds to purchase and sell shares   5. Property taxes on brokerage offices   6. Advertising   7. Depreciation on brokerage office equipment, such as computers and computer networks   c.  Estimate the contribution margin for each segment, assuming that depreciation represents the majority of fixed costs.   Investor Services (in millions) Advisor Services (in millions) Estimated contribution margin $fill in the blank 10 $fill in the blank 11 d.  If Schwab decided to sell its Advisor Services business to another company, estimate how much operating income would decline under the following assumptions. Assume the fixed costs that serve the Advisor Services business would not be sold but would be used by the other sector: $fill in the blank 12 million Assume the fixed assets were “sold”: $fill in the blank 13 million

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Charles Schwab Corporation is one of the more innovative brokerage and financial service companies in the United States. The company recently provided information about its major business segments as follows (in millions):

 

Investor
Services
Advisor
Services
Revenues $7,321   $2,811  
Income from operations 3,176   1,386  
Depreciation 186   120  

 

a.  The   segment serves the retail customer, you and me. These include brokerage, Internet, and mutual fund services. The   segment includes the same services provided for financial institutions, such as banks, mutual fund managers, insurance companies, and pension plan administrators.

b.  Indicate whether the following costs are a “Variable Cost” or a “Fixed Cost” in the “Investor Services“.

1. Commissions to brokers  
2. Fees paid to exchanges for executing trades  
3. Depreciation on brokerage offices  
4. Transaction fees incurred by Schwab mutual funds to purchase and sell shares  
5. Property taxes on brokerage offices  
6. Advertising  
7. Depreciation on brokerage office equipment, such as computers and computer networks  

c.  Estimate the contribution margin for each segment, assuming that depreciation represents the majority of fixed costs.

  Investor Services
(in millions)
Advisor Services
(in millions)
Estimated contribution margin $fill in the blank 10 $fill in the blank 11

d.  If Schwab decided to sell its Advisor Services business to another company, estimate how much operating income would decline under the following assumptions.

Assume the fixed costs that serve the Advisor Services business would not be sold but would be used by the other sector: $fill in the blank 12 million
Assume the fixed assets were “sold”: $fill in the blank 13 million

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Ratio Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education