Music Teachers, Inc., is an educational association for music teachers that has
ID: 2468165 • Letter: M
Question
Music Teachers, Inc., is an educational association for music teachers that has 20,000 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.
Music Teachers, Inc.
Statement of Revenues and Expenses
For the Year Ended November 30
Revenues $ 3,275,000
Expenses:
Salaries 920,000
Personnel costs 230,000
Occupancy costs 280,000
Reimbursement of member costs to local chapters 600,000
Other membership services 500,000
Printing and paper 320,000
Postage and shipping 176,000
Instructors’ fees 80,000
General and administrative 38,000
Total expenses 3,144,000
Excess of revenues over expenses $ 131,000
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.
a. 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.
b. One-year subscriptions to Teachers’ Forum were sold to nonmembers and libraries at $30 per
subscription. A total of 2,500 of these subscriptions were sold last year. In addition to subscriptions, the
magazine generated $100,000 in advertising revenues. The costs per magazine subscription were $7 for
printing and paper and $4 for postage and shipping.
c. A total of 28,000 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.
d. 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 2,400 students. A total of 1,760
students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to
teach some courses.
e. Salary costs and space occupied by division follow:
Salaries
Space
Occupied
(square feet)
Membership $ 210,000 2,000
Magazine Subscriptions 150,000 2,000
Books and Reports 300,000 3,000
Continuing Education 180,000 2,000
Corporate staff 80,000 1,000
Total $ 920,000 10,000
Christine ACC-341 Managerial Cost Accounting 01- Rivera
25-2016: BSAO123
4/15/2016 3.4 Exercises and Problems
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Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The
$280,000 in occupancy costs includes $50,000 in rental cost for a warehouse used by the Books and
Reports Division for storage purposes.
f. Printing and paper costs other than for magazine subscriptions and for books and reports relate to the
Continuing Education Division.
g. 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.
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 whole.
$ $ $ $
$
Division
Association Magazine Books & Continuing
Total Membership Subscriptions Reports Education
Sales:
Total revenues 0 0 0 0 0
Expenses traceable to segments:
Total traceable expenses 0 0 0 0 0
0 0 0 0 0
Common expenses not traceable to divisions:
Total common expenses 0
0
4/15/2016 3.4 Exercises and Problems
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Explanation / Answer
Answer:
Occupancy cost = $230000 allocated + $50000 direct to the books and reports division = $280000
Revenues Membership dues (20000*$100) 2000000 Assigned to magazine subscriptions (20000*$20) 400000 Assigned to membership division 1600000 Assigned to non - member magazine (2500*$30) 75000 Assigned to reports and texts (28000*$25) 700000 Continuing education courses: One day courses (2400*$75) 180000 Two day courses (1760*$125) 220000 Assigned to continuing education 400000 salaries and personnel costs salaries given Personnel costs (25% of salaries) Membership division 210000 52500 Magazine subscription division 150000 37500 Books and reports division 300000 75000 Continuing Education division 180000 45000 Total assigned to divisions 840000 210000 corporate staff 80000 20000 Total 920000 230000Related Questions
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