Shoe Shock Innovations manufactures athletic shoe inserts that cushion the foot
ID: 2579661 • Letter: S
Question
Shoe Shock Innovations manufactures athletic shoe inserts that cushion the foot and reduce the impact of exercise on the joints. The company has two divisions, Sole Inserts and Heel Inserts. A segmented income statement from last month follows. Sole Inserts Division Heel Inserts Division Total Shoe Shock Sales revenue $493,700 $2,540,000 $3,033,700 Less variable expenses 303,000 2,009,000 2,312,000 Contribution margin 190,700 531,000 721,700 Less traceable fixed expenses 123,300 349,700 473,000 Segment margin $67,400 $181,300 248,700 Common fixed costs 171,900 Net operating income $76,800 Chris Kelly is Shoe Shock’s sales manager. Although this statement provides useful information, Chris wants to know how well the company’s two distribution channels, specialty footwear stores and drug stores, are performing. Marketing data indicates that 20% of sole inserts and 75% of heel inserts are sold through specialty footwear stores. A recent analysis of corporate fixed costs revealed that 50% of all fixed costs are traceable to specialty footwear stores and 45% of all fixed costs to drug stores. (a) Prepare a segment margin income statement for Shoe Shock’s two distribution channels. (If the amount is negative then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).) Specialty Footwear Stores Drug Stores Total Shoe Shock
Explanation / Answer
answer:
Segment margin income statement for Shoe Shock’s two distribution channels.
Specialty
Foot store
Drug Stores
Total Shoe
Shock
Revenue
Sole inserts (20% :80%)
98740
394960
493,700
Heel inserts(75% :25%)
1905000
635000
2,540,000
Total revenue
2003740
1029960
3,033,700
Less :
variable expenses
Sole inserts (20% :80%)
60600
242400
303,000
Heel inserts(75% :25%)
1506750
502250
$2,009,000
Total variable expenses
1567350
744650
2,312,000
Contribution margin
436390
285310
721700
Traceable fixed expenses
322,450
290,205
612,655
Segmented margin
113,940
-4,895
109,045
Common fixed expenses
32245
Operating income
76,800
Total Fixed cost
(473000+171900
644900
Speciality
Foot store (50%)
322450
Drug Stores (45%)
290205
Common fixed expenses (5%)
32245
Comment:
The company need to drop down Drug store
Specialty
Foot store
Drug Stores
Total Shoe
Shock
Revenue
Sole inserts (20% :80%)
98740
394960
493,700
Heel inserts(75% :25%)
1905000
635000
2,540,000
Total revenue
2003740
1029960
3,033,700
Less :
variable expenses
Sole inserts (20% :80%)
60600
242400
303,000
Heel inserts(75% :25%)
1506750
502250
$2,009,000
Total variable expenses
1567350
744650
2,312,000
Contribution margin
436390
285310
721700
Traceable fixed expenses
322,450
290,205
612,655
Segmented margin
113,940
-4,895
109,045
Common fixed expenses
32245
Operating income
76,800
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