Chapter 20, Problem 20.16EX

(a)

To determine

Contribution Margin

Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting variable cost from sales or deducting variable selling and administrative expenses from manufacturing margin.

To Determine: The contribution margin and contribution margin ratio for each segment of Incorporation TW.

(b)

To determine

To Identify: Does the segment with the highest contribution margin in the option A means, that it is the most profitable segment with the highest operating income.