Question

this is a 2 part question, please help!

Problem 1-1 Segment Reporting ana Decision-making LLO7-4) Vulcan Company's contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 900,000 Variable expenses 300.000 Contribution margin 600,000 Fixed expenses 495.000 Set operating income $ 105,000 Management is disappointed with the company's performance and is wondering what can be done to improve profits. By @xamining sales and cost records, you have determined the following: a. The company is divided into two sales territories-Northern and Southern. The Northern Territory recorded $400,000 in sales and $200,000 in variable expenses during June: the remaining sales and variable expenses were recorded in the Southern Territory Fixed expenses of $156,000 and $145,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories b. The company is the exclusive distributor for two products-Paks and Tibs. Sales of Paks and Tibs totaled $190,000 and $210,000, respectively, in the Northern territory during June. Variable expenses are 29% of the selling price for Paks and 69% for Tibs. Cost records show that $93.100 of the Northern Territory's foed expenses are traceable to Paks and $46.200 to Tibs, with the remainder common to the two products, Required: 1a. Prepare contribution format segmented income statements for the total company broken down between sales territories 1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line. Complete this question by entering your answers in the tabs below. < Prex 6 7 8 Next > c G Search or type URL 4 2 3 $ 4 5 6 & 7 +00 9 0 W E R T Y U 1 O Р S D F G H J K K L х C V B N. м.

Answer 1

The detailed answer is below.

1A PARTICULARS Sales Less: Variable Expenses Contribution Margin Less: Traceable Fixed Expenses Territorial Margin Less: Common Fixed Expenses Net Operating Income TOTAL COMPANY AMOUNT % 900,000 100 300,000 33.3 600,000 66.7 301,000 33.4 299,000 33.2 194,000 21.5 105,000 11.7 SALES TERRITORY NORTHERN SOUTHERN AMOUNT AMOUNT 400,000 100 500,000 100 200,000 50 100,000 20 200,000 50 400,000 80 156,000 39 145,000 29 44,000 11 255,000 51 NOTE Common fixed expenses Total Fixed expense of Company - (Fixed Expense of Northern + Fixed Expense of Southern) 495,000 - (156,000 + 145,000) = 194,000 NOTE Traceable fixed expense of Total Company is sum of Fixed Expense of Northern & Southern NOTE % is calculated by taking sales as the base. All the expenses or margins are divided by Sales to get the percentage NOTE The % of Territorial Margin comes to 33.3 if calculated as 66.7 - 33.4 but dividing 299,000/900,000, it comes to 33.2 So, there is a slight rounding off error in this answer. Similar rounding off error is there for Common fixed expense and net operating income Total Company NOTE Sales of Southern Territory = 900,000 - 400,000 = 500,000 Variable Expense of Southern Territory = 300,000 - 200,000 = 100,000

1B PARTICULARS Sales Less: Variable Expenses Contribution Margin Less: Traceable Fixed Expenses Territorial Margin Common Fixed Expenses Net Operating Income NORTHERN TERRITORY AMOUNT % 400,000 100 200,000 50 200,000 50 139,300 34.8 60,700 15.2 16,700 4.2 44,000 11 PRODUCT LINE PAKS TIBS AMOUNT % AMOUNT % 190,000 100 210,000 100 55,100 29 144,900 69 134,900 71 65,100 31 93,100 49 46,200 22 41,800 22 18,900 9 NOTE Common fixed expenses =Total Fixed expense of Northern Territory - (Fixed Expense of Paks + Fixed Expense of Tibs) 156,000 - (93,100 +46,200) = 16,700 NOTE Traceable fixed expense of Northern Territory is sum of Fixed Expense of Paks and Tibs NOTE % is calculated by taking sales as the base. All the expenses/margins are divided by Sales to get the percentage NOTE Variable Expense of Paks = 29% * 190,000 Variable Expense of Tibs = 69% * 210.000

There are 3 figures in percentage form in Total Company (1A) which may differ slightly due to rouding off.