Question

Shannon Company segments its income statement into its North and South Divisions. The company's overall sales, contribution margin ratio, and net operating income are $900,000, 30%, and $18,000, respectively. The North Division's contribution margin and contribution margin ratio are $102,000 and 34%, respectively. The South Division's segment margin is $120,000. The company has $180,000 of common fixed expenses that cannot be traced to either division Required: Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. In addition, for the company as a whole and for each segment, show each item on the segmented income statements as a percent of sales. (Round your percentage answers to 1 decimal place (l.e.1234 should be entered as 12.3)) Total Company Amount % North Amount Divisions South % Amount %

Answer 1

Answer with working notes is given below

Sales Variable Cost Contribution Fixed cost Segment margin Common expense Net Operating Income Total Company Amount $900,000 100.0% $630,000 70.0% $270,000 30.0% $72,000 8.0% $198,000 22.0% $180,000 20.0% $18,000 2.0% North Amount $300,000 $198,000 $102,000 $24,000 $78,000 Divisions South % Amount % 100.0% $600,000 100.0% 66.0% $432,000 72.0% 34.0% $168,000 28.0% 8.0% $48,000 8.0% 26.0% $120,000 20.0% Working notes: North Contribution CM Ration Total Sales $102,000 34% $300,000 ($102,000/34%) South sales Total sales Less: North sales South Sales $900,000 $300,000 $600,000 Total segment margin Net operating income Add: common fixed expense Total segment margin Less: Segment margin South Segment Margin for North $18,000 $180,000 $198,000 $120,000 $78,000 Fixed expense Contribution for entire company Total segment margin Fixed cost of both Segment $270,000 $198,000 $72,000