Music Teachers, Inc., is an educational association for music teachers that has

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Music Teachers, Inc., is an educational association for music teachers that has 20,000 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 journal, 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 prior to its preparation.

Membership dues are $100 per year, of which $20 is considered to cover a one-year subscription to the association’s journal. 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 Subscription Division.

One-year subscriptions to Teachers’ Forum were sold to nonmembers and libraries at $36 per subscription. A total of 3,200 of these subscriptions were sold last year. In addition to subscriptions, the magazine generated $119,000 in advertising revenues. The costs per magazine subscription were $9 for printing and paper and $4 for postage and shipping.

A total of 28,800 technical reports and professional texts were sold by the Books and Reports Division at an average unit selling price of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.

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 2,600 students. A total of 1,780 students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.

     Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $292,000 in occupancy costs includes $52,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes.

Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.

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.

Prepare a contribution format 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., is an educational association for music teachers that has 20,000 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 journal, 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.

Explanation / Answer

Music Teachers, Inc. Contribution Margin Statement For the Year Ended November 30 Association Divisions Total Member ship magazine subscriptions Books & reports Continuing education Sales Membership Dues (20000*$80) 1600000 1600000 Non member magazine Subscriptions (3200*$36)+$20*20000) 515200 515200 Advertising 119000 119000 Reports& Texts (28800*$25) 720000 720000 Continuing Edication Courses (2600*$75 + 1780*$125 417500 417500 Total revenue 3371700 1600000 634200 720000 417500 Expenses Traceble to Segments Salaries 901000 224000 157000 322000 198000 personnel Costs (25% of salaries) 225250 56000 39250 80500 49500 Occupancy costs 220000 72000 24000 76000 48000 Reimbursements to local chapters 550000 550000 Other membership services 550000 550000 printing & paper 348000 208800 115200 24000 Postage & Shipping 150400 92800 57600 Instructors fee 72000 72000 Total tracable Expenses 3016650 1452000 521850 651300 391500 Division Segment margin 355050 148000 112350 68700 26000 Common Expenses Not traceable to Divisions Salaries& Corporate staff 91000 personnel Costs (25% of salaries) 22750 Occupancy Costs 72000 Postage & Shipping 43600 General Adminstration 36000 Total Common expenses 265350 Excess of revenue Over Expenses 89700 Total Member ship magazine subscriptions Books & reports Continuing education Common costs Printing & paper 348000 208800 115200 24000 (3200+20000)$9 28800*$4 (348000-208800-115200) Postage& Shipping 150400 92800 57600 43600 (3200+20000)$4 28800*$2 (194000-150400) Occupancy Costs allocation (292000-52000) 72000 24000 24000 48000 72000 240000*3/10 240000*1/10 240000*1/10 240000*2/10 240000*3/10

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