Question

Music Teachers, Inc., is an educational association for music teachers that has 20,300 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	$	3,380,000
Expenses:
Salaries		972,000
Personnel costs		243,000
Occupancy costs		226,000
Reimbursement of member costs to local chapters		510,000
Other membership services		510,000
Printing and paper		325,000
Postage and shipping		183,000
Instructors’ fees		73,000
General and administrative		36,000
Total expenses		3,078,000
Excess of revenues over expenses	$	302,000

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 20,300 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 3,000 one-year subscriptions to Teachers’ Forum were also sold last year to nonmembers and libraries at $38 per subscription. In addition to subscriptions, the journal generated $116,000 in advertising revenues.

c. The costs to produce the Teachers’ Forum magazine included $8 per subscription for printing and paper and $4 per subscription for postage and shipping.

d. A total of 28,000 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 1,800 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	$	220,000		3,000
Magazine Subscriptions		157,000		1,000
Books and Reports		320,000		1,000
Continuing Education		193,000		2,000
Corporate staff		82,000		3,000
Total	$	972,000		10,000

Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $226,000 in occupancy costs includes $52,000 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 Books & Association Total Magazine Subscriptions Continuing Education Membership Reports Sales: Membership dues Total revenues Expenses traceable to segments: Total traceable expenses 0 0 0 0 0 0 0S0S $ $ Common expenses not traceable to divisions: Total common expenses

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	2,030,000	1,624,000	406,000
Journal- Non Member	114,000		114,000
Advertising	116,000		116,000
Reports & text	700,000			700,000
Continuing Courses	420,000				420,000
Total revenue	3,380,000	1,624,000	636,000	700,000	420,000
Expenses:-
Salaries	890,000	220,000	157,000	320,000	193,000
Personnel Cost	222,500	55,000	39,250	80,000	48,250
Occupancy cost	173,800	52,200	17,400	69,400	34,800
Reimbursement of member cost	510,000	510,000
Other membership service	510,000	510,000
Printing & paper	325,000		186,400	112,000	26,600
Postage & shipping	149,200		93,200	56,000
Instructor Fees	73,000				73,000
Total Traceable Expenses	2,853,500	1,347,200	493,250	637,400	375,650
	526,500	276,800	142,750	62,600	44,350
Common Expenses
Salaries- Corporate staff	82,000
Personnel Cost	20,500
Occupancy cost	52,200
Postage & shipping	33,800
General Administration	36,000
Total Common Expenses	224,500
Excess of revenue over expenses	302,000