Question

Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff.

The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income statement for May is given below.

	Sales Region
	West				Central			East
Sales	$	313,000			$	802,000		$	700,000
Regional expenses (traceable):
Cost of goods sold		95,000				243,000			313,000
Advertising		107,000				238,000			240,000
Salaries		51,000				56,000			114,000
Utilities		9,200				15,600			14,400
Depreciation		22,000				28,000			27,000
Shipping expense		13,000				29,000			37,000
Total regional expenses		297,200				609,600			745,000
Regional income (loss) before corporate expenses		\15,800				192,400			(45,400	)
Corporate expenses:
Advertising (general)		17,000				42,000			33,000
General administrative expense		20,000				20,000			20,000
Total corporate expenses		37,000				62,000			53,000
Net operating income (loss)	$	(21,200	)		$	130,400		$	(98,400	)

The cost of goods sold and shipping expense are both variable. All other costs are fixed.

Required:

Prepare a new contribution format segmented income statement for May. (Round percentage answers to 1 decimal place.)

3. Prepare a new contribution format segmented income statement for May. (Round percentage answers to 1 decimal place.) Total Company Amount % West Amount Central Amount East Amount % % % Variable expenses: Total variable expenses Traceable fixed expenses: Total traceable fixed expenses

Answer 1

	Total company	West	Central	East
	Amount	%	Amount	%	Amount	%	Amount	%
Sales	1815000	100.0%	313000	100.0%	802000	100.0%	700000	100.0%
Variable expenses:
Cost of goods sold	651000	35.9%	95000	30.4%	243000	30.3%	313000	44.7%
Shipping expense	79000	4.4%	13000	4.2%	29000	3.6%	37000	5.3%
Total variable expenses	730000	40.2%	108000	34.5%	272000	33.9%	350000	50.0%
Contribution margin	1085000	59.8%	205000	65.5%	530000	66.1%	350000	50.0%
Traceable fixed expenses:
Advertising	585000	32.2%	107000	34.2%	238000	29.7%	240000	34.3%
Salaries	221000	12.2%	51000	16.3%	56000	7.0%	114000	16.3%
Utilities	39200	2.2%	9200	2.9%	15600	1.9%	14400	2.1%
Depreciation	77000	4.2%	22000	7.0%	28000	3.5%	27000	3.9%
Total traceable fixed expenses	922200	50.8%	189200	60.4%	337600	42.1%	395400	56.5%
Regional segment margin	162800	9.0%	15800	5.0%	192400	24.0%	(45400)	(6.5%)
Common fixed expenses:
Advertising (general)	92000	5.1%
General administrative expenses	60000	3.3%
Total common fixed expense	152000	8.4%
Net operating income (loss)	10800	0.6%