Segment analysis for a service company Charles Schwab Corporation (SCHW) 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 $5,411 $2,067 Operating income 2,031 962 Depreciation 180 54 a. The Investor Services v segment serves the retail customer, you and me. These are the brokerage, Internet, and mutual fund services used by individual Investors. The Advisor Services v 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" segment. 1. Commissions to brokers Varlable Cost v 2. Fees paid to exchanges for executing trades Variable Cost v 3. Depreciation on brokerage offices Flxed Cost v 4. Transaction fees incurred by Schwab mutual funds to purchase and sell shares Varlable Cost / 5. Property taxes on brokerage offices Flxed Cost v 6. Depreciation on brokerage office equipment, such as computers and computer networks Fixed Cost v 7. Advertising Variable Cost v c. Estimate the contribution margin for each segment, assuming depreciation represents the majority of fixed costs. Investor Services Advisor Services (In mlllons) (In millons) Estimated contribution margin d. If Schwab decided to sell its "Advisor Services" accounts to another company, estimate how much operating income would decline under the following assumptions. Assume the fixed costs that serve Advisor investors would not be sold but would be used by the other sector: $ X million Assume the fixed assets were "sold": $ Xmillion
Segment analysis for a service company Charles Schwab Corporation (SCHW) 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 $5,411 $2,067 Operating income 2,031 962 Depreciation 180 54 a. The Investor Services v segment serves the retail customer, you and me. These are the brokerage, Internet, and mutual fund services used by individual Investors. The Advisor Services v 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" segment. 1. Commissions to brokers Varlable Cost v 2. Fees paid to exchanges for executing trades Variable Cost v 3. Depreciation on brokerage offices Flxed Cost v 4. Transaction fees incurred by Schwab mutual funds to purchase and sell shares Varlable Cost / 5. Property taxes on brokerage offices Flxed Cost v 6. Depreciation on brokerage office equipment, such as computers and computer networks Fixed Cost v 7. Advertising Variable Cost v c. Estimate the contribution margin for each segment, assuming depreciation represents the majority of fixed costs. Investor Services Advisor Services (In mlllons) (In millons) Estimated contribution margin d. If Schwab decided to sell its "Advisor Services" accounts to another company, estimate how much operating income would decline under the following assumptions. Assume the fixed costs that serve Advisor investors would not be sold but would be used by the other sector: $ X million Assume the fixed assets were "sold": $ Xmillion
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Segment analysis for a service company
Charles Schwab Corporation (SCHW) 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
$5,411
$2,067
Operating income
2,031
962
Depreciation
180
54
a. The Investor Services v segment serves the retail customer, you and me. These are the brokerage, Internet, and mutual fund services used by
individual Investors. The Advisor Services v
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" segment.
1. Commissions to brokers Varlable Cost v
2. Fees paid to exchanges for executing trades Variable Cost v
3. Depreciation on brokerage offices Flxed Cost v
4. Transaction fees incurred by Schwab mutual funds to purchase and sell shares Varlable Cost /
5. Property taxes on brokerage offices Flxed Cost v
6. Depreciation on brokerage office equipment, such as computers and computer networks Fixed Cost v
7. Advertising Variable Cost v
Transcribed Image Text:c. Estimate the contribution margin for each segment, assuming depreciation represents the majority of fixed costs.
Investor Services
Advisor Services
(In mlllons)
(In millons)
Estimated contribution margin
d. If Schwab decided to sell its "Advisor Services" accounts to another company, estimate how much operating income would decline under the following
assumptions.
Assume the fixed costs that serve Advisor investors would not be sold but would be used by the other sector: $
X million
Assume the fixed assets were "sold": $
Xmillion
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education