Exercise 6-7 Segmented Income Statement [LO6-4] Shannon Company segments its inc

Question

Exercise 6-7 Segmented Income Statement [LO6-4]

Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $460,000, 50%, and $36,800, respectively. The North Division’s contribution margin and contribution margin ratio are $127,500 and 75%, respectively. The South Division’s segment margin is $36,000. The company has $55,200 of common fixed expenses that cannot be traced to either division.

Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3))

Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $460,000, 50%, and $36,800, respectively. The North Division’s contribution margin and contribution margin ratio are $127,500 and 75%, respectively. The South Division’s segment margin is $36,000. The company has $55,200 of common fixed expenses that cannot be traced to either division.

Explanation / Answer

Particular TOTAL NORTH SOUTH Sales 460000 170000 290000 variable expenses (230000) (42500) (187500) Contribution margin 230000 127500 102500 traceable fixed expenses (138000) (71500) (66500) division segment margin 92000 56000 36000 common fixed expense (55200) operating income 36800

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