c. All of the following are contributing reasons that Cat Japan is the poorest performing segment except:

1. The manufacturing margin as a percentage of sales is the lowest.
2. The dealer commissions as a percentage of sales are the highest.
3. The variable promotion expenses as a percentage of sales are the highest.
4. The variable cost of goods sold as a percentage of sales is the highest.
5. None of these choices is correct.

The correct answer is:

Segment Profitability Analysis The marketing segment sales for Caterpillar Inc. (CAT) for a recent year follow: Caterpillar Inc. Machinery and Engines Marketing Segment Sales (in millions) Building Large Marine & Construction Cat Core Earth Electric Power Petroleum Products Japan Components moving Power Excavation Systems Logistics Power Mining Turbines $2,217 $1,225 $1,234 $5,045 $2,847 $4,562 $2,885 $659 $2,132 $3,975 $3,321 Sales In addition, assume the following information: Building Large Marine & Construction Cat Core Earth Electric Power Petroleum Products Japan Components moving Power Excavation Systems Logistics Power Mining Turbines 45% 55% 49% 51% 54% 52% 53% 50% 50% 52% 48% Variable cost of goods sold as a percent of sales Dealer commissions as a percent of sales Variable promotion expenses (in millions) 9% 11% 8% 8% 10% 6% 5% 10% 9% 7% 9% 310 120 150 600 200 600 300 75 270 480 400 a. Use the sales information and the additional assumed information to prepare a contribution margin by segment report. Round answers to two decimal places, except for contribution margin ratio, which should be rounded to one decimal place. Enter all amounts as positive numbers. Caterpillar Inc. Contribution Margin by Segment (assumed) (in millions. excent ratio fiqures) b. Prepare a table showing the manufacturing margin, dealer commissions, and variable promotion expenses as a percent of sales for each segment. Round percents to one decimal place, if required. Enter all amounts as positive numbers. Caterpillar Inc. Contribution Margin by Segment (assumed) (in millions, except ratio figures) Building Core Large Marine and Cat Japan Electric Logistics Turbines Construction Components Earthmoving Excavation Power Petroleum Mining Power Products Systems Power % % % % % % % % % % % % % % % % % % % % % % Manufacturing margin Dealer commissions Variable promotion expenses Contribution margin ratio % % % % % % % % % % % % % % % % % % % % % %