Question

Problem 5.(20 points) Tracey Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent month contribution format income statement, which follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $1,000,000 390,000 610,000 625.000 $ (15.0.00 In an effort to isolate the problem, the president has asked for an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Sales Variable expenses as a percentage of sales Traceable fixed expenses East $250,000 52% $160,000 Division Central $400,000 30% $200,000 West $350,000 40% $175.000 1. Prepare a contribution format income statement segmented by divisions, as desired by the president Total Company East Division Central West Sales Variable expenses Contribution margin Traceable fixed expenses Divisional segment margin Common fixed expenses not traceable to divisions Net operating income (loss)

Answer 1

o e motori bertian Gomet Income Statement -DMISION WOT Consoy EAST CENTRAL 350,00 Total 100,00 250,oo Soles 130,00 Variable 390,000 210,00 20000 610,00 Contribution onggin lisao 26 2,00, as laos 16oos 535aw berto Tooceable fE fooo 3500 7500 Cugao) Divisional Segmont mesin 9ooo Common fired exp not rocable to Crow) at operiting Income Choose

s Sale Joerned by got in the wast Divisia Advertising Inconot by & Ismo 2. 9 око Varble enf. not. of ulgow) it is no 18300 out morgin 23700 Trocable fe trao Diorstand Segment 6200 so weat Division segment mogin Increan by $ 27000 6200-35oo) So Totul not operating Income Insered by 82700 thats why toss Converted into profit toss of $150o Converted into Proft & 1200 Yes Increasing Advertising benefit the Company" "