Script, Inc., has two product lines. The September income statements of each pro

Question

Script, Inc., has two product lines. The September income statements of each product line and the company are as follows:

Pens and pencils are sold in two territories, Florida and Alabama, as follows:

The common fixed expenses are traceable to each territory as follows:

The direct fixed expenses of pens, $9,000, and of pencils, $7,000, cannot be identified with either territory. The company's accountants were unable to allocate any of the common fixed expenses to the various segments.

Prepare income statements segmented by territory for September, including a column for the entire firm. Do not use negative signs with your answers.

SCRIPT, INC.
Product Line and Company Income Statements
For Month of September Pens Pencils Total Sales $ 30,000 $ 30,000 $ 60,000 Less variable expenses (12,000) (12,000) (24,000) Contribution margin 18,000 18,000 36,000 Less direct fixed expenses (9,000) (7,000) (16,000) Product margin $ 9,000 $ 11,000 20,000 Less common fixed expenses (6,000) Net income $ 14,000

Explanation / Answer

Script, Inc. Territory and Company Income Statements For the month of September Particulars Florida Alabama Company Totals Sales: Pens 18000 12000 30000 Pencils 9000 21000 30000 Total Sales 27000 33000 60000 Less: Variable Costs: Pens 7200 4800 12000 Pencils 3600 8400 12000 Total variable Expense 10800 13200 24000 Contribution Margin 16200 19800 36000 Direct fixed expenses 2000 3000 5000 Territory margin 14200 16800 31000 Common Fixed Expenses: Pens 9000 Pencils 7000 Home Office 1000 Total 17000 Net Income 14000

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