Segment Analysis for a Service CompanyCharles Schwab Corporation is one of the more innovative brokerage and financial service companies in the United States. The company recentlyprovided information about its major business segments as follows (in millions):InvestorAdvisorServices ServicesRevenues$7,321$2,811Income from operations3,1761,386Depreciation186120a. Thesegment serves the retail customer, you and me. These include brokerage, Internet, and mutual fund services. Thesegment includes the same services provided for financial institutions, such as banks, mutual fund managers, insurancecompanies, 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 brokers2. Fees paid to exchanges for executing trades3. Depreciation on brokerage offices4. Transaction fees incurred by Schwab mutual funds to purchase and sell shares5. Property taxes on brokerage offices6. Advertising7. 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 Advisor Services(in millions)(in millions)Estimated contribution margind. If Schwab decided to sell its Advisor Services business to another company, estimate how much operating income would decline under the followingassumptions.Assume the fixed costs that serve the Advisor Services business would not be sold but would be used by the other sector: $Assume the fixed assets were "sold": $millionmillion

Charles Schwab Corporation is one of the more innovative brokerage, has two business segments:…

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

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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Segment Analysis for a Service Company
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
Advisor
Services 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 Advisor Services
(in millions)
(in millions)
Estimated contribution margin
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: $
Assume the fixed assets were "sold": $
million
million

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