Music Teachers, Inc., is an educational association for music teachers that has
ID: 2601836 • Letter: M
Question
Music Teachers, Inc., is an educational association for music teachers that has 20,400 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 $38 per subscription. A total of 2,900 of these subscriptions were sold last year. In addition to subscriptions, the magazine generated $105,000 in advertising revenues. The costs per magazine subscription were $7 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 2,400 students. A total of 1,840 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 $288,000 in occupancy costs includes $53,000 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.
Music Teachers, Inc.Statement of Revenues and Expenses
For the Year Ended November 30 Revenues $ 3,385,200 Expenses: Salaries 961,000 Personnel costs 240,250 Occupancy costs 288,000 Reimbursement of member costs to local chapters 560,000 Other membership services 520,000 Printing and paper 336,000 Postage and shipping 203,000 Instructors’ fees 74,000 General and administrative 34,000 Total expenses 3,216,250 Excess of revenues over expenses $ 168,950 1. 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 Division Association Magazine Books & Continuing Total Membership Subscriptions Reports Education Sales Membership dues Non-member journal subscriptions lotal revenues Expenses traceable to segments Total traceable expenses Common expenses not traceable to divisions lotal common expenses
Explanation / Answer
workings:
Association Total Membership Magazine Subscription Books &Reports Continuing education Sales Member ship dues 2,040,000 1,632,000 408,000 Teacher forum subscriptions 110,200 110,200 Magazine advertisement revenue 105,000 105,000 Technical report and texts sale 720,000 720,000 One day courses 410,000 410,000 Total revenues 3,385,200 1,632,000 623,200 720,000 410,000 Expenses traceble to segments Salaries 862,000 215,000 156,000 304,000 187,000 Personnel costs 215,500 53,750 39,000 76,000 46,750 Occupancy costs 217,500 70,500 23,500 76,500 47,000 Printing and paper 336,000 20,300 115,200 200,500 Reimbursement of member costs 560,000 560,000 Other membership services 520,000 520,000 Postage and shipping 69,200 11,600 57,600 Instructor fee 74,000 74,000 Total traceble expenses 2,854,200 1,419,250 250,400 629,300 555,250 Contribution 531,000 212,750 372,800 90,700 (145,250) Common expenses not traceble to divisions Corporate staff salaries 99,000 Corporate staff personnel costs 24,750 occupancy costs 70,500 General and administrative 34,000 Corporate postage and shipping 133,800 Total common expenses 362,050 Net profit 168,950Related Questions
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