RESPONSIBILITY ACCOUNTING
SEGMENTED INCOME STATEMENT
Sales
Variable Expenses
Contribution Margin
Traceable Fixed Expenses
Segment Margin
Common Fixed Expenses
Net Operating Income / Profit Margin
TOTAL/DIVISION
xxx
(xxx)
xxx
(xxx)
xxx
(xxx)
xxx
SEGMENT 1
xxx
(xxx)
xxx
(xxx)
xxx
SEGMENT 2
xxx
(xxx)
xxx
(xxx)
xxx
FORMULAS:
Return on Investment = Operating Income / Operating Assets
Operating Income = Operating Assets * Return on Investments
Operating Assets = Operating Income / Return on Investments
Residual Income = Net Operating Income - (Average Operating Assets * Minimum Required Rate of Return)
Minimum Required Rate of Return = (Operating Income - Residual Income) / Operating Assets
Sales = Average Operating Assets * Turnover
Sales Margin = Net Operating Income / Sales
Turnover = Sales / Average Operating Assets
Return on Investment = Sales Margin * Turnover
TRANSFER PRICING
AT CAPACITY:
Selling Division
Minimum TP = VC + (SP-VC-AC) * Units Given Up
Units Transferred
Buying Division
Maximum TP </= Purchase Price from Outside
BELOW CAPACITY:
Selling Division
Minimum TP = VC - Avoidable Cost
Buying Division
Maximum TP </= Purchase Price from Outside