Magellan & Columbus, Ltd., manufactures boats and personal watercraft. The compa
ID: 2497280 • Letter: M
Question
Magellan & Columbus, Ltd., manufactures boats and personal watercraft. The company operates three separate divisions: yachts, sailboats, and jet skis. The company’s 2014 income statement is presented by product line as follows: Yachts Sailboats Jet Skis Total Sales revenue $ 64,147,000 $ 25,160,000 $ 6,275,000 $ 95,582,000 Variable cost of goods sold 30,961,000 13,590,000 3,529,000 48,080,000 Fixed cost of goods sold 9,007,000 5,010,000 700,000 14,717,000 Gross profit 24,179,000 6,560,000 2,046,000 32,785,000 Variable operating expenses 8,010,000 1,500,000 864,000 10,374,000 Fixed operating expenses 4,046,000 1,030,000 311,000 5,387,000 Allocated corporate costs 3,007,000 2,006,000 1,025,000 6,038,000 Operating income $ 9,116,000 $ 2,024,000 $ (154,000 ) $ 10,986,000 Prepare a segment margin income statement showing each of the three divisions. Fixed cost of goods sold and fixed operating expenses can be traced to each product line.
Explanation / Answer
Segment margin income statement:
Yachts
Sailboats
Jet skis
Total
Total Sales revenue
$ 64,147,000
$ 25,160,000
$ 6,275,000
$ 95,582,000
Less: Variable Expenses:
Variable cost of goods sold
$ (30,961,000)
$ (13,590,000)
$ (3,529,000)
$ (48,080,000)
Variable operating expenses
$ (8,010,000)
$ (1,500,000)
$ (864,000)
$ (10,374,000)
Segment Contribution Margin
$ 25,176,000
$ 10,070,000
$ 1,882,000
$ 37,128,000
Less: Traceable Fixed Expenses:
Fixed cost of goods sold
$ (9,007,000)
$ (5,010,000)
$ (700,000)
$ (14,717,000)
Fixed operating expenses
$ (4,046,000)
$ (1,030,000)
$ (311,000)
$ (5,387,000)
Segment Income
$ 12,123,000
$ 4,030,000
$ 871,000
$ 17,024,000
Less: Common Fixed Expenses
$ (6,038,000)
Net Operating income
$ 10,986,000
Segment margin income statement:
Yachts
Sailboats
Jet skis
Total
Total Sales revenue
$ 64,147,000
$ 25,160,000
$ 6,275,000
$ 95,582,000
Less: Variable Expenses:
Variable cost of goods sold
$ (30,961,000)
$ (13,590,000)
$ (3,529,000)
$ (48,080,000)
Variable operating expenses
$ (8,010,000)
$ (1,500,000)
$ (864,000)
$ (10,374,000)
Segment Contribution Margin
$ 25,176,000
$ 10,070,000
$ 1,882,000
$ 37,128,000
Less: Traceable Fixed Expenses:
Fixed cost of goods sold
$ (9,007,000)
$ (5,010,000)
$ (700,000)
$ (14,717,000)
Fixed operating expenses
$ (4,046,000)
$ (1,030,000)
$ (311,000)
$ (5,387,000)
Segment Income
$ 12,123,000
$ 4,030,000
$ 871,000
$ 17,024,000
Less: Common Fixed Expenses
$ (6,038,000)
Net Operating income
$ 10,986,000
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