Segment analysis for a service company
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.
Commissions to brokers
Variable Cost
Fees paid to exchanges for executing trades Variable Cost
Depreciation on brokerage offices Fixed Cost
Transaction fees incurred by Schwab mutual funds to purchase and sell shares Variable Cost
Property taxes on brokerage offices Fixed Cost
Depreciation on brokerage office equipment, such as computers and computer networks Fixed Cost
Advertising
Amortization of intangible assets Fixed Cost
c Estimate the contribution margin for each segment, assuming depreciation represents the majority of fixed costs.
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: : million
Assume the fixed assets were "sold": $
million
