Music Teachers, Inc., is an educational association for music teachers that has
ID: 2451846 • Letter: M
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 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 $32 per subscription. A total of 2,500 of these subscriptions were sold last year. In addition to subscriptions, the magazine generated $102,000 in advertising revenues. The costs per magazine subscription were $8 for printing and paper and $4 for postage and shipping.
A total of 28,300 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 2,500 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.
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.
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 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.
Required: 1. 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 whol Division Association Magazine Books & Continuing Total Membership Subscriptions Reports Education Sales Total revenues Expenses traceable to segments Total traceable expenses 0 $ 0 $ 0 $ 0 $ Common expenses not traceable to divisions Total common expensesExplanation / Answer
Sales Association total Membership Magazine Subscriptions Books and Reports Continuing Education members dues 2020000 1616000 404000 non member subscription 80000 80000 advertising revenue 102000 102000 technical reports 707500 707500 one day course 187500 187500 two day course 222500 222500 TOTAL REVENUES 3319500 1616000 586000 707500 410000 EXPENSES TRACEBLE TO HEADS paper and printing 338000 20000 113200 204800 postage and shipping. 66600 10000 56600 Salary 886000 225000 151000 320000 190000 personnel costs 221500 56250 37750 80000 47500 occupancy costs 59000 59000 TOTAL TRACEBLE EXPENSES 1571100 281250 218750 628800 442300 COMMON EXPENSES NOT TRACEBLE TO DIVISIONS Reimbursement of member costs to local chapters 560000 Other membership services 590000 Instructors’ fees 79000 General and administrative 31000 Salaries to corporate staff 81000 personnel cost of corporate staff 20250 Postage and shipping 136400 Occupancy cost 224000 TOTAL COMMON EXPENSES 1721650 REVENUE OVER EXPENSES $26750
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