Segment Analysis

The Charles Schwab Corporation (SCHW) is one of the more innovative brokerage and financial service companies in the United States. The company provided information about its major business segments as follows (in millions) for a recent year.

	Investor (Retail) Services		Advisor Services
Revenues	$4,832		$1,992
Operating income before taxes	1,136		534
Depreciation and amortization	132		66

a. How do you believe Schwab defines the difference between the segments?

The Investor (Retail) Services segment probably focuses on investors who buy stocks and the Advisor Services buys only mutual funds.The Investor (Retail) Services segment probably focuses on the company's smaller offices and the Advisor Services focuses on their larger city offices.The Investor (Retail) Services segment serves the retail customer and the Advisor Services segment includes services for corporate or pension funds.The Investor (Retail) Services segment serves the retail customer and the Advisor Services segment includes services for corporate or pension funds.

b. All of the following would be considered to be variable costs in the "Investor (Retail) Services" segment except:

Commissions to brokers.Depreciation on brokerage offices.Fees paid to exchanges for executing trades.Transaction fees incurred by Strobe mutual funds to purchase and sell shares.Depreciation on brokerage offices.

c. Estimate the contribution margin for each segment assuming that depreciation and amortization are the only fixed assets incurred.

	Investor (Retail) Services		Advisor Services
Operating income before taxes	$fill in the blank 3		$fill in the blank 4
Plus depreciation and amortization	$fill in the blank 5		$fill in the blank 6
Estimated contribution margin	$fill in the blank 7 Incorrect		$fill in the blank 8

d. If Schwab decided to sell its "advisory services" accounts to another company, estimate how much operating income would decline. Assume that the fixed costs that serve advisory services (computers, servers, and facilities) would not be sold but would be used by the other sector. $fill in the blank 9 million