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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

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter12: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 12.4E
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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: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
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
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