Music Teachers, Inc., is an educational association for music teachers that has
ID: 2602455 • 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 $32 per subscription. A total of 3,700 of these subscriptions were sold last year. In addition to subscriptions, the magazine generated $101,000 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 1,840 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 $289,000 in occupancy costs includes $58,000 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 20,400 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.
Explanation / Answer
Solution - Segmented Income Statement for Music Teachers Inc.
$1632000
(20400*$80)
$408000
(20400*$20)
$118400
(3700*$32)
$720000
(28800*$25)
$425000
(2600*$75)+(1840*$125)
$56750
($227000*25%)
$38000
($152000*25%)
$78500
($314000*25%)
$48250
($193000*25%)
Occupancy cost (Note 2) :-
$58000 - Books and reports
Remaning ($289000 - $58000) $231000 in ratio of space occupied i.e. 3:1:1:2:3
$69300
($231000*3/10)
$23100
($231000*1/10)
$81100
($58000) + ($231000*1/10)
$46200
($231000*2/10)
$33300
(3700*$9)
$115200
(28800*$4)
$195500
Balance ($344000 - $33300 - $115200)
Postage shipping
(Note 4)
$14800
(3700*$4)
$57600
(28800*$2)
Personnel cost
$23750
($95000*25%
$69300
($231000*3/10)
$157600
($230000 - $14800 - $57600)
Notes
1) Out of $100 Per member Income, $80 is member subscription & $20 is magazine subscription
2) Occupancy cost allocable is $231000 ($289000 - $58000) in space occupancy ration of 3:1:1:2:3
3) Remaining paper printing expenses are allocable to continuing education as per question
4) Since nothing is written in question about Balance postage expenses, it has been assumed that remaining expenses are common cost
Particulars Total Membership Magazine Subscription Books and Reports Continuing Education Sales Member Dues (Note 1) $2040000$1632000
(20400*$80)
$408000
(20400*$20)
Non Member magazine subscription $118400$118400
(3700*$32)
Advertising $101000 $101000 Books and reports $720000$720000
(28800*$25)
Continuing Education $425000$425000
(2600*$75)+(1840*$125)
Total Revenue (A) $3404400 $1632000 $627400 $720000 $425000 Expenses Traceable to Segments Salary (Given) $886000 $227000 $152000 $314000 $193000 Personnel Cost (25% of salary) $221500$56750
($227000*25%)
$38000
($152000*25%)
$78500
($314000*25%)
$48250
($193000*25%)
Occupancy cost (Note 2) :-
$58000 - Books and reports
Remaning ($289000 - $58000) $231000 in ratio of space occupied i.e. 3:1:1:2:3
$219700$69300
($231000*3/10)
$23100
($231000*1/10)
$81100
($58000) + ($231000*1/10)
$46200
($231000*2/10)
Reimursement of members cost to local chapters $570000 $570000 Other Membership fees $540000 $540000 Printing Paper (Note 3) $344000$33300
(3700*$9)
$115200
(28800*$4)
$195500
Balance ($344000 - $33300 - $115200)
Postage shipping
(Note 4)
$72400$14800
(3700*$4)
$57600
(28800*$2)
Instructors fees $78000 $78000 Total Traceable Expenses (B) $2931600 $1463050 $261200 $646400 $560950 Division Segment Margin (A - B) $472800 $168950 $366200 $73600 ($135950) Common Expenses not traceable to divisions Salary $95000Personnel cost
$23750
($95000*25%
Occupancy cost$69300
($231000*3/10)
Postage and shipping$157600
($230000 - $14800 - $57600)
General and administrative overhead (as per question) $36000 Total common expenses $381650 Excess of Revenue over expenses ($472800 - $381650) $91150Related Questions
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