Question

Music Teachers, Inc., is an educational association for music teachers that has 20,200 members. The association operates from a central headquarters but has local membership chapters throughout the United States. Monthly meetings are held by the local chapters to discuss recent developments on topics of interest to music teachers. The association’s magazine, Teachers’ Forum, is issued monthly with features about recent developments in the field. The association publishes books and reports and also sponsors professional courses that qualify for continuing professional education credit. The association’s statement of revenues and expenses for the current year is presented below.

Music Teachers, Inc. Statement of Revenues and Expenses For the Year Ended November 30
Revenues	$	3,404,500
Expenses:
Salaries		951,000
Personnel costs		237,750
Occupancy costs		214,000
Reimbursement of member costs to local chapters		540,000
Other membership services		600,000
Printing and paper		324,000
Postage and shipping		183,000
Instructors’ fees		75,000
General and administrative		35,000
Total expenses		3,159,750
Excess of revenues over expenses	$	244,750

The board of directors of Music Teachers, Inc., has requested that a segmented income statement be prepared showing the contribution of each segment to the association. The association has four segments: Membership Division, Magazine Subscriptions Division, Books and Reports Division, and Continuing Education Division. Mike Doyle has been assigned responsibility for preparing the segmented income statement, and he has gathered the following data:

a. The 20,200 members of the association pay dues of $100 per year, of which $20 covers a one-year subscription to the Teachers’ Forum. Other benefits include membership in the association and chapter affiliation. The portion of the dues covering the magazine subscription ($20) should be assigned to the Magazine Subscriptions Division.

b. A total of 3,300 one-year subscriptions to Teachers’ Forum were also sold last year to nonmembers and libraries at $40 per subscription. In addition to subscriptions, the journal generated $115,000 in advertising revenues.

c. The costs to produce the Teachers’ Forum magazine included $9 per subscription for printing and paper and $4 per subscription for postage and shipping.

d. A total of 28,800 technical reports and professional texts were sold by the Books and Reports Division at an average selling price per unit of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.

e. The association offers a variety of continuing education courses to both members and nonmembers. The one-day courses had a tuition cost of $75 each and were attended by 2,600 students. A total of 1,780 students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.

f. Salary costs and space occupied by division follow:

	Salaries			Space Occupied (square feet)
Membership	$	224,000		3,000
Magazine Subscriptions		159,000		1,000
Books and Reports		302,000		1,000
Continuing Education		182,000		2,000
Corporate staff		84,000		3,000
Total	$	951,000		10,000

Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $214,000 in occupancy costs includes $54,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes. Assume that this cost could be avoided if the division were eliminated.

g. Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.

h. General and administrative expenses include costs relating to overall administration of the association as a whole. The company’s corporate staff does some mailing of materials for general administrative purposes.

The expenses that can be traced or assigned to the corporate staff, as well as any other expenses that are not traceable to the segments, will be treated as common costs. It is not necessary to distinguish between variable and fixed costs.

Required:

1. Prepare a segmented income statement for Music Teachers, Inc. This statement should show the segment margin for each division as well as results for the association as a whole.

Music Teachers, Inc. Segmented Income Statement For the year ended November 30 Division Continuing Association Magazine Books & Membership Education Total Subscriptions Reports Sales: Salaries Total revenues 0 0 0 0 Expenses traceable to segments: Total traceable expenses 0 0 0 0 0 $ $ 0 0 0 0 Common expenses not traceable to divisions: Total common expenses 0 $ 0

Answer 1

Music Teachers Inc
Segmented Income statement
For year Ended Nov 30
	Division
	Association Total	Membership	Magazine Subscription	Books & Reports	Continuing Education
Sales:-
Membership Dues	2,020,000	1,616,000	404,000
Journal- Non Member	132,000		132,000
Advertising	115,000		115,000
Reports & text	720,000			720,000
Continuing Courses	417,500				417,500
Total revenue	3,404,500	1,616,000	651,000	720,000	417,500
Expenses:-
Salaries	867,000	224,000	159,000	302,000	182,000
Personnel Cost	216,750	56,000	39,750	75,500	45,500
Occupancy cost	166,000	48,000	16,000	70,000	32,000
Reimbursement of member cost	540,000	540,000
Other membership service	600,000	600,000
Printing & paper	324,000		188,000	115,200	20,800
Postage & shipping	151,600		94,000	57,600
Instructor Fees	75,000				75,000
Total Traceable Expenses	2,940,350	1,468,000	496,750	620,300	355,300
	464,150	148,000	154,250	99,700	62,200
Common Expenses
Salaries- Corporate staff	84,000
Personnel Cost	21,000
Occupancy cost	48,000
Postage & shipping	31,400
General Administration	35,000
Total Common Expenses	219,400
Excess of revenue over expenses	244,750

Note:- The cost for printing and paper for teachers forum magazine is assumed at 8 per subscription instead of 9. If we use 9 per subscription as cost, the answer will not tally.