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Segment analysis for a service company Winston Sylvester Corporation is one of the more innovative brokerage and financial service companies in United States. The company recently provided information about its major business segments as follows (in millions): Investor Services $2,680 1,024 108 Advisor Services $1,333 177 Revenues Income from operations Depreciation a. The Investor Services ✔ segment serves the retail customer, you and me. These are the brokerage, Internet, and mutual fund services used by individual Investors. The Advisor Services ✓ 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. Variable Cost ✓ 2 Fees paid to exchanges for executing trades. Variable Cost ✓ 3 Depreciation on brokerage offices. Fixed Cost ✓ 4 Transaction fees incurred by Schwab mutual funds to purchase and sell shares. Variable Cost ✓ 5. Property taxes on brokerage offices. Fixed Cost ✔ 6 Depreciation on brokerage office equipment, such as computers and computer networks. Fixed Cost ✔ 7 Advertising Variable Cost ✓ 64

Segment analysis for a service company Winston Sylvester Corporation is one of the more innovative brokerage and financial service companies in United States. The company recently provided information about its major business segments as follows (in millions): Investor Services $2,680 1,024 108 Advisor Services $1,333 177 Revenues Income from operations Depreciation a. The Investor Services ✔ segment serves the retail customer, you and me. These are the brokerage, Internet, and mutual fund services used by individual Investors. The Advisor Services ✓ 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. Variable Cost ✓ 2 Fees paid to exchanges for executing trades. Variable Cost ✓ 3 Depreciation on brokerage offices. Fixed Cost ✓ 4 Transaction fees incurred by Schwab mutual funds to purchase and sell shares. Variable Cost ✓ 5. Property taxes on brokerage offices. Fixed Cost ✔ 6 Depreciation on brokerage office equipment, such as computers and computer networks. Fixed Cost ✔ 7 Advertising Variable Cost ✓ 64

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Segment analysis for a service company Winston Sylvester Corporation is one of the more innovative brokerage and financial service companies in United States. The company recently provided information about its major business segments as follows (in millions): Investor Services Revenues Income from operations Advisor Services $1,333 $2,680 1,024 Depreciation 108 a. The Investor Services ✔ segment serves the retail customer, you and me. These are the brokerage, Internet, and mutual fund services used by individual Investors. The Advisor Services ✔ 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. Variable Cost ✓ 2 Fees paid to exchanges for executing trades. Variable Cost ✓ 3 Depreciation on brokerage offices. Fixed Cost ✓ 177 64 Cost ✓ 4 Transaction incurred by Schwab mutual funds to purchase and sell shares. Var 5. Property taxes on brokerage offices. Fixed Cost ✓ 6 Depreciation on brokerage office equipment, such as computers and computer networks. Fixed Cost ✓ 7 Advertising Variable Cost ✓
Transcribed Image Text:Segment analysis for a service company Winston Sylvester Corporation is one of the more innovative brokerage and financial service companies in United States. The company recently provided information about its major business segments as follows (in millions): Investor Services Revenues Income from operations Advisor Services $1,333 $2,680 1,024 Depreciation 108 a. The Investor Services ✔ segment serves the retail customer, you and me. These are the brokerage, Internet, and mutual fund services used by individual Investors. The Advisor Services ✔ 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. Variable Cost ✓ 2 Fees paid to exchanges for executing trades. Variable Cost ✓ 3 Depreciation on brokerage offices. Fixed Cost ✓ 177 64 Cost ✓ 4 Transaction incurred by Schwab mutual funds to purchase and sell shares. Var 5. Property taxes on brokerage offices. Fixed Cost ✓ 6 Depreciation on brokerage office equipment, such as computers and computer networks. Fixed Cost ✓ 7 Advertising Variable Cost ✓
c. Estimate the contribution margin for each segment, assuming depreciation represents the majority of fixed costs. Investor Services (in millions) Advisor Services (in millions) 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: $ Assume the fixed assets were "sold": million million
Transcribed Image Text:c. Estimate the contribution margin for each segment, assuming depreciation represents the majority of fixed costs. Investor Services (in millions) Advisor Services (in millions) 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: $ Assume the fixed assets were "sold": million million
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