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Also notice that: Contribution margin is computed by subtracting variable costs from sales; and The divisional segment margin represents the Television Division’s contribution to overall company profits. The Television Division’s results can be rolled into Webber, Inc.’s overall results as shown. Notice that the results of the Television and Computer Divisions sum to the results shown for the whole company. The common costs for the company as a whole ($25,000) are not allocated to the divisions. Common costs are not allocated to segments because these costs would remain even if one of the divisions were eliminated. The Television Division’s results can also be broken down into smaller segments. This enables us to see how traceable fixed costs of the Television Division can become common costs of smaller segments. Assume that the Television Division can be broken down into two major product lines – Regular and Big Screen. Assume that the segment margins for these two product lines are as shown. Of the $90,000 of fixed costs that were previously traceable to the Television Division, only $80,000 is traceable to the two product lines and $10,000 is a common cost. The Television Division’s results can also be used for decision making. For example, assume Webber believes that if the Television Division spends $5,000 additional dollars on advertising it will increase sales of Regular and Big Screen televisions by 5%. Webber can compute the profit impact of this course of action as follows: a. The Regular contribution margin would increase by $5,250. b. The Big Screen contribution margin would increase by $2,250. c. The Television Division’s segment margin would increase by $2,500. The costs assigned to a segment should include all the costs attributable to that segment from the company’s entire value chain. The value chain consists of all major business functions that add value to a company’s products and services. ? Since only manufacturing costs are i