Question

Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff.

The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income statement for May is given below.

	Sales Region
	West				Central			East
Sales	$	311,000			$	797,000		$	704,000
Regional expenses (traceable):
Cost of goods sold		98,000				236,000			313,000
Advertising		109,000				241,000			238,000
Salaries		54,000				58,000			114,000
Utilities		9,400				16,100			13,500
Depreciation		22,000				35,000			30,000
Shipping expense		14,000				31,000			40,000
Total regional expenses		306,400				617,100			748,500
Regional income (loss) before corporate expenses		4,600				179,900			(44,500	)
Corporate expenses:
Advertising (general)		14,000				42,000			35,000
General administrative expense		21,000				21,000			21,000
Total corporate expenses		35,000				63,000			56,000
Net operating income (loss)	$	(30,400	)		$	116,900		$	(100,500	)

The cost of goods sold and shipping expense are both variable. All other costs are fixed.

Required:

3. Prepare a new contribution format segmented income statement for May. (Round percentage answers to 1 decimal place.

Total Company West Central East Amount % Amount % Amount % Amount % Sales Variable expenses: Cost of goods sold Shipping expense Total variable expenses 0 0.0 0 0.0 0 0.0 0 0.0 Contribution margin 0 0.0 0 0.0 0 0.0 0 0.0 Traceable fixed expenses: Salaries Utilities Advertising Depreciation Total traceable fixed expenses 0 0.0 0 0.0 0 0.0 0 0.0 0 0.0 $0 0.0 $0 0.0 $0 0.0 Common fixed expenses: Advertising (general) General administration Total common fixed expense 0 0.0 Net operating income (loss) $0 0.0

Answer 1

Solution: | Total Company West Central East Amount % Amount % Amount% Amount% | 181 2000 100.0 311000 100.0 797000 100.00 704000 100.0 Sales Variable expenses: Cost of goods sold Shipping expense | 647000 85000| 35.71 98000 31.5 236000 29.6 313000| 44.5| 4.7| 14000 4.5 31000 3.9| 40000 5.7 73 2000| 40.4) 112000[ 36.0 2670001 33.5 353000 50.1 10800001 59.6 1990001 64.0 5300001 66.5 351000| 49.9 Total variable expenses Contribution margin Traceable fixed expenses: Salaries Utilities Advertising Depreciation 226000 39000 588000 87000 12.5 54000 17.4 58000 7.3 114000 2.2 9400 3.0 16100 2.0 13500 32.5 109000 35.0 241000| 30.2 238000 4.8 220001 7.1 35000 4.4| 30000 16.2 1.9 33.8 4.3 9400001 51.9 194400 62.5| 3501001 43.9 395500 56.2 140000 7.7 4600 1.5 179900 22.6 -44500 -6.3 Total traceable fixed expenses Regional segment margin Common fixed expenses: Advertising (general) General administration 91000 63000 5.0 3.5 Total common fixed expense Net operating income (loss) 154000 -14000 8.5 -0.8