Music Teachers, Inc., is an educational association for music teachers that has
ID: 2549394 • 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 magazine, 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:
a. The 19,900 members of the association pay dues of $100 per year, of which $20 covers a one-year subscription to the Teachers’ Forum. 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 Subscriptions Division.
b. A total of 2,500 one-year subscriptions to Teachers’ Forum were also sold last year to nonmembers and libraries at $40 per subscription. In addition to subscriptions, the journal generated $113,000 in advertising revenues.
c. The costs to produce the Teachers’ Forum magazine included $8 per subscription for printing and paper and $4 per subscription for postage and shipping.
d. A total of 28,200 technical reports and professional texts were sold by the Books and Reports Division at an average selling price per unit of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.
e. 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.
f. Salary costs and space occupied by division follow:
Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $233,000 in occupancy costs includes $55,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes. Assume that this cost could be avoided if the division were eliminated.
g. Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.
h. 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 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.Statement of Revenues and Expenses
For the Year Ended November 30 Revenues $ 3,308,000 Expenses: Salaries 962,000 Personnel costs 240,500 Occupancy costs 233,000 Reimbursement of member costs to local chapters 580,000 Other membership services 530,000 Printing and paper 322,000 Postage and shipping 207,000 Instructors’ fees 79,000 General and administrative 33,000 Total expenses 3,186,500 Excess of revenues over expenses $ 121,500
Explanation / Answer
Music Teachers Inc. Segmented Income Statement Division Details Association Membership Magazine Books & Continuing Total subscriptions Reports Education Sales: Membership dues 1990000 1592000 398000 Non - member journal subscriptions 100000 100000 Reports and texts 705000 705000 Continuing education 400000 400000 Advertising 113000 113000 Total Revenues 3308000 1592000 611000 705000 400000 Expenses traceable to segments: Salaries 864000 223000 152000 306000 183000 Personnel costs (25% of salaries) 216000 55750 38000 76500 45750 Occupancy costs 179300 53700 17900 71900 35800 Printing paper 322000 178400 112800 30800 Postage and shipping 145600 89200 56400 Instructors fee 79000 79000 Reimbursement of mebmer costs 580000 580000 Other membershipservices 530000 530000 Total traceable expenses 2915900 1442450 475500 623600 374350 Segementwise excess of revenues over expenses 392100 149550 135500 81400 25650 Common expenses not traceable to dividions Salaries 98000 Personnel costs (25% of salaries) 24500 Occupancy costs 53700 Postage and shipping 61400 General andadministrative expenses 33000 Total common expenses 270600 Total excess of revenues over expenses 121500 Workings: Revenues: Membership 19900 Membership dues per year 100 Share of Magazine subscription from this 20 Membership fee only 80 Total membership fee received 1592000 Total magazine subscription from mebmers 398000 Non member subscription for magazine 2500 Non member subscripition fee 40 Total non member subscription for magazine 100000 Total subscription for magazine 498000 Number of technical reports and professional texts sold 28200 Sale price per report/ text 25 Total revenue from technical reports and texts 705000 Continuing education One-day course fee 75 Number of students that attended one-day course 2400 One-day course fee collected 180000 Two-day course fee 125 Number of students that attended two-day course 1760 Two-day course fee collected 220000 Total revenue of continuing education segment 400000 Occupancy costs Total Membership Magazine Books & Continuing Corporate subscriptions Reports Education Staff Space occupied 10000 3000 1000 1000 2000 3000 Occupancy Costs 233000 Rent of warehouse for books and reports div. 54000 54000 To be allocated based on the space occupied 179000 53700 17900 17900 35800 53700 total occupancy costs 53700 17900 71900 35800 53700 Printing and paper costs 322000 Teacher's forum subscription 22300 Cost of printing per magazine 8 Total costs of printing for teachers' forum 178400 Techincal reports and texts 28200 Cost of printing per reort 4 Total cost of printing for reports and texts 112800 Printing and paper for continuing education 30800 Postage and shipping 207000 Teacher's forum subscription 22300 Cost of postage and shipping per magazine 4 Total costs of postage and shipping for teachers' forum 89200 Techincal reports and texts 28200 Cost of postage and shippingper reort 2 Total cost of postage and shipping for reports and texts 56400 Balance postage and shipping to corporate expenses 61400
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