Question

Music Teachers, Inc., is an educational association for music teachers that has 20,200 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 magazine, 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.

Music Teachers, Inc.

Statement of Revenues and Expenses

For the Year Ended November 30

Revenues $ 3,387,300

Expenses:

Salaries 981,000

Personnel costs 245,250

Occupancy costs 226,000

Reimbursement of member costs to local chapters 510,000

Other membership services 580,000

Printing and paper 326,000

Postage and shipping 180,000

Instructors’ fees 72,000

General and administrative 32,000

Total expenses 3,152,250

Excess of revenues over expenses $ 235,050

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:

a. The 20,200 members of the association pay dues of $100 per year, of which $20 covers a one-year subscription to the Teachers’ Forum. 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 Subscriptions Division.

b. A total of 3,700 one-year subscriptions to Teachers’ Forum were also sold last year to nonmembers and libraries at $34 per subscription. In addition to subscriptions, the journal generated $109,000 in advertising revenues.

c. The costs to produce the Teachers’ Forum magazine included $8 per subscription for printing and paper and $4 per subscription for postage and shipping.

d. A total of 28,700 technical reports and professional texts were sold by the Books and Reports Division at an average selling price per unit of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.

e. 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 1,760 students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.

f. Salary costs and space occupied by division follow:

Salaries Space Occupied (square feet)

Membership $ 229,000 3,000

Magazine Subscriptions 150,000 1,000

Books and Reports 330,000 1,000

Continuing Education 188,000 2,000

Corporate staff 84,000 3,000

Total $ 981,000 10,000

Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $226,000 in occupancy costs includes $54,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes. Assume that this cost could be avoided if the division were eliminated.

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

h. 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.

Required:

1. Prepare a 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.

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.						Teacher Forum		Music Teacher
Particulars	Total	Membership	Magazine	Books and Reports	Continuing Education		Working-1	Revenue	Membership	Magazine	Total
Revenue:								Total Member			20,200
Membership Due (working-1)	$      2,020,000	$      1,616,000	$      404,000					Per Unit Price	$                    80	$                                 20	$                                              100
Non Member (3,700*$34)	$         125,800		$      125,800					Total Revenue	$      1,616,000	$                      404,000	$                                  2,020,000
Advertising	$         109,000		$      109,000
Reports & Texts 28,700*$25	$         717,500			$                    717,500
Continuing Education($3,387,300-Other)	$         415,000				$                         415,000
							Working-2	Salary and Personnel Cost
Total Revenue (Given in Question)	$      3,387,300	$      1,616,000	$      638,800	$                    717,500	$                         415,000				Salary	Personnel Cost
										25% of Salary
Expenses tracable to Segment:								Membership	$         229,000	$                         57,250
								Magazine Subs	$         150,000	$                         37,500
Salaries (working-2)	$         897,000	$         229,000	$      150,000	$                    330,000	$                         188,000			Books and Reports	$         330,000	$                         82,500
Personnel Cost (working-2)	$         224,250	$            57,250	$        37,500	$                      82,500	$                            47,000			Continuing Education	$         188,000	$                         47,000
Occupancy Cost (working-3)	$         174,400	$            51,600	$        17,200	$                      71,200	$                            34,400			Corporate Staff	$            84,000	$                         21,000
Reimbursment of members cost to local	$         510,000	$         510,000							$         981,000	$                      245,250
Other membership Service	$         580,000	$         580,000
Printing and Paper (Working-4)	$         326,000		$      191,200	$                    114,800	$                            20,000		Working-3	Occupancy Cost
Postage and Shipping (working-4)	$         153,000		$        95,600	$                      57,400
Instructors Fee	$            72,000				$                            72,000				Space	Allocation based on Space ($226,000-$54,000)=$172,000	Direct Allocation ($54,000)	Total
								Membership	3,000	$                         51,600		$                  51,600
Total Traceable Expenses	$      2,936,650	$      1,427,850	$      491,500	$                    655,900	$                         361,400			Magazine Subs	1,000	$                         17,200		$                  17,200
Division Segment Margin	$         450,650	$         188,150	$      147,300	$                      61,600	$                            53,600			Books and Reports	1,000	$                         17,200	$                                        54,000	$                  71,200
								Continuing Education	2,000	$                         34,400		$                  34,400
Common Expenses NOT tracable to Segment:								Corporate Staff	3,000	$                         51,600		$                  51,600
									10,000	$                      172,000	$                                        54,000	$                226,000
Salaries (working-2)-Corporate Staff	$            84,000
Personnel Cost (working-2)-Corporate Staff	$            21,000
Occupancy Cost (working-3)-Corporate Staff	$            51,600						Working-4	Printing and Paper
Postage and Shipping (working-4)-Corporate Staff	$            27,000									Per Unit	Total Paper	Per Unit Postage	Total Postage
General Admin exp	$            32,000							Membership
Common Expenses NOT tracable to Segment:	$         215,600							Magazine Subs	23,900	$                                   8	$                                     191,200	$                             4	$           95,600
								Books and Reports	28,700	$                                   4	$                                     114,800	$                             2	$           57,400
Excess of revenues over expense (Margin- Untraceable Exp)	$         235,050							Continuing Education (Total-books-Subs)			$                                        20,000
								Corporate Staff (Total-books-Subs)					$           27,000
											$                                     326,000		$         180,000