Music Teachers, Inc., is an educational association for music teachers that has
ID: 2464355 • Letter: M
Question
Music Teachers, Inc., is an educational association for music teachers that has 19,900 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 $30 per subscription. A total of 3,400 of these subscriptions were sold last year. In addition to subscriptions, the magazine generated $120,000 in advertising revenues. The costs per magazine subscription were $9 for printing and paper and $4 for postage and shipping.
A total of 28,700 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 1,880 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 $281,000 in occupancy costs includes $52,000 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 19,900 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. Segmented Income Statement For the year ended Nov. 30 Membership Division Magazine Subscription Division Books & Reports Division Continuing Education Division Total Revenues Membership fees 1,592,000 398,000 1,990,000 19900 X $80 19900 X $20 Subscription Fees Recd 102,000 102,000 3400 X $30 Advertising Revenues 120,000 120,000 Technical report 717,500 717,500 28700 X $25 Tution Costs - One Day 195,000 195,000 2600 X $75 Tution Costs -Two Day 235,000 235,000 1880 X $125 Total Revenues 1,592,000 620,000 717,500 430,000 3,359,500 Variable Costs Printing & Paper 209,700 114,800 324,500 23300 X $9 28700 X $4 Postage & Shipping 93,200 57,400 150,600 23300 X $4 28700 X $2 Total Variable Costs - 302,900 172,200 - 475,100 Contribution 1,592,000 317,100 545,300 430,000 2,884,400 Fixed Costs Salaries 218,000 152,000 322,000 199,000 891,000 Personnel Costs (25% of Salaries) 54,500 38,000 80,500 49,750 222,750 Occupancy Cost - warehouse 52,000 52,000 Occupancy Cost - Other 68,700 22,900 22,900 45,800 160,300 Instructor Fees 77,000 77,000 Reimbursement of member cost to local chapters 570,000 570,000 Other Membership Services 550,000 550,000 Total fixed Costs 1,461,200 212,900 477,400 371,550 2,523,050 Segmented profit 130,800 104,200 67,900 58,450 361,350 Common Costs - Non Traceable General & Administrative 36,000 Printing & Paper 23,500 Postage & Shipping 79,400 Salaries 85,000 Personnel Costs (25% of Salaries) 21,250 Occupancy Cost - Other 68,700 Total Common Cost - Non Traceable 313,850 Profit 47,500
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