Music Teachers, Inc., is an educational association for music teachers that has
ID: 2448872 • Letter: M
Question
Music Teachers, Inc., is an educational association for music teachers that has 20,100 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 journal, 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.
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 prior to its preparation.
Membership dues are $100 per year, of which $20 is considered to cover a one-year subscription to the association’s journal. 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 Subscription Division.
One-year subscriptions to Teachers’ Forum were sold to nonmembers and libraries at $36 per subscription. A total of 2,900 of these subscriptions were sold last year. In addition to subscriptions, the magazine generated $103,000 in advertising revenues. The costs per magazine subscription were $9 for printing and paper and $4 for postage and shipping.
A total of 28,900 technical reports and professional texts were sold by the Books and Reports Division at an average unit selling price of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.
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 1,820 students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.
Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $283,000 in occupancy costs includes $59,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes.
Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.
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.
Prepare a contribution format 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., is an educational association for music teachers that has 20,100 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 journal, 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.
Explanation / Answer
Music Teachers Inc. Contribution format segmented income statement Membership Magazine Subscription Books & Report Continuing Education Corporate Total Division Division Division Division Staff Revenue Membership Fees 1608000 402000 2010000 Subscription fees Recd 104400 104400 Advertising revenues 103000 103000 Techinical Reports & Proff. Texts 722500 722500 Tution Cost - One Day Course 195000 195000 Tution Cost - Two Day Course 227500 227500 A. Total Revenue 1608000 609400 722500 422500 0 3362400 Variable Costs Printing & paper 207000 115600 15400 338000 Postage & Shipping 92000 57800 29200 179000 Salaries 226000 151000 330000 182000 97000 986000 Personal Costs 56500 37750 82500 45500 24250 246500 Reimbursement of members costs to local chapters 530000 530000 Other membership services 600000 600000 Instructor fees 71000 General Administration 35000 Occupancy Costs - Warehouse rent 59000 59000 Occupancy Costs - other 67200 22400 22400 44800 67200 224000 B. Total costs 1479700 510150 667300 287700 217650 3268500 Excess of Revenues over Expenses 128300 99250 55200 134800 -217650 93900
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