2 Problem 6-21 Segment Reporting and Decision-Making [L06-4 Vulcan Company\'s co

Question

2 Problem 6-21 Segment Reporting and Decision-Making [L06-4 Vulcan Company's contribution format income statement for June is as follows 10 points Incore Statement 900,000 400,000 Variable expenses Contribution margin ellook Net operating income $50,000 Print Marpgement is disappointed with the company's performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following References a. The company is divided into two sales territories-Northern and Southern. The Northern Territory recorded $500,000 in sales and $200,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $245,000 and $88,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories b. The company is the exclusive distributor for two products-Paks and Tibs. Sales of Paks and Tibs totaled $250,000 and $250,00o, respectively, in the Northern territory during June. Variable expenses are 21% of the selling price for Paks and 59% for Tibs Cost records show that $102,500 of the Northern Territory's fixed expenses are traceable to Paks and $52,500 to Tibs with the remainder common to the two products Required: 1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories 1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line. Complete this question by entering your answers in the tabs below ?Prev 2of 2 :::Next , .. MacBook Air

Explanation / Answer

Sales Territory Total Company Northern Southern Amount % Amount % Amount %   Sales $900,000 100.0% 500000 100.0% $400,000 100.0%   Variable expenses $400,000 44.4% 200,000 40.0% 200,000 50.0%   Contribution margin $500,000 55.6% 300,000 60.0% 200,000 50.0%   Traceable fixed expenses $333,000 37.0% 245,000 49.0% 88,000 22.0%   Sales territory segment margin $167,000 18.6% $55,000 11.0% $112,000 28.0%   Common fixed expenses 117,000 13.0%   Net operating income $50,000 5.6% Product Line Northern Territory Paks Tibs Amount % Amount % Amount %   Sales $500,000 100.0% 250000 100.0% 250000 100.0%   Variable expenses $200,000 40.0% 52,500 21.0% 147,500 59.0%   Contribution margin $300,000 60.0% 197,500 79.0% 102,500 41.0%   Traceable fixed expenses $155,000 31.0% 102,500 41.0% 52,500 21.0%   Product line segment margin $145,000 29.0% $95,000 38.0% $50,000 20.0%   Common fixed expenses 90,000 18.0%   Sales territory segment margin $55,000 11.0%

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