EXERCISE 6-8 Segmented Income Statement [L04] Michaels Company segments its inco

Question

EXERCISE 6-8 Segmented Income Statement [L04] Michaels Company segments its income statement into its East and West Divisions. The com- pany's overall sales, contribution margin ratio, and net oper ting income are $600,000, 50%, and $50,000, respectively. The West Division's contribution margin and contribution margin ratio are $150,000 and 75%, respectively. The East Division's segment margin is $70,000. The company has $60,000 of common fixed costs that cannot be traced to either division. Required: Prepare an income statement for Michacls Company that uses the contribution format and is seg- mented by divisions. In addition, for the company as a whole and for each segment, show eaclh item on the segmented income statements as a percent of sales.

Explanation / Answer

Segmented income statement :

Total West East Amount % Amount % Amount % Sales 600000 100% 200000 100% 400000 100% Variable cost 300000 50% 50000 25% 250000 62.5% Contribution margin 300000 50% 150000 75% 150000 37.5% Traceable fixed expense 190000 31.7% 110000 55% 80000 20% Segment margin 110000 18.3% 40000 20% 70000 17.5% Common Fixed expense 60000 10% Net operating income 50000 8.3%

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