Question

Case 6-30 Service Organization; Segment Reporting (L06-4) 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 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. $ 3.382,500 Munie Teachers, Inc. Statement of Revenues and Expenses For the Year Ended November 30 Revenues Expenses: Salaries Personnel coats Occupancy couts Reimbursement of member costs to local chapters Other membership services Printing and paper Postage and shipping Instructor fees General and administrative Total expenses Excess of revenues over expenses 982,000 245,500 209,000 570,000 540,000 320,000 198,000 74.000 33,000 3,171,500 211.000 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 20,400 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 3,300 one-year subscriptions to Teachers' Forum were also sold last year to nonmembers and libraries at $30 per subscription. In addition to subscriptions, the journal generated $116,000 in advertising revenues. c. The costs to produce the Teachers' Forum Magazine included $7 per subscription for printing and paper and $4 per subscription for postage and shipping. d. A total of 28,100 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 1,840 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: Space Occupied (square feet) 3.000 1.000 1,000 Salaries $ 224.000 160.000 314,000 Membership Magazine subscriptions Books and Reports

Answer 1

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Particulars	Total	Membership	Magazine	Books and Reports	Continuing Education
Revenue:
Membership Due (working-1)	$      2,040,000	$      1,632,000	$      408,000
Non Member (3,300*$30)	$            99,000		$        99,000
Advertising	$         116,000		$      116,000
Reports & Texts 28,100*$25	$         702,500			$                    702,500
Continuing Education($3,319,300-Other)	$         425,000				$                         425,000
Total Revenue (Given in Question)	$      3,382,500	$      1,632,000	$      623,000	$                    702,500	$                         425,000
Expenses tracable to Segment:
Salaries (working-2)	$         891,000	$         224,000	$      160,000	$                    314,000	$                         193,000
Personnel Cost (working-2)	$         222,750	$            56,000	$        40,000	$                      78,500	$                            48,250
Occupancy Cost (working-3)	$         164,000	$            45,000	$        15,000	$                      74,000	$                            30,000
Reimbursment of members cost to local	$         570,000	$         570,000
Other membership Service	$         540,000	$         540,000
Printing and Paper (Working-4)	$         320,000		$      165,900	$                    112,400	$                            41,700
Postage and Shipping (working-4)	$         151,000		$        94,800	$                      56,200
Instructors Fee	$            74,000				$                            74,000
Total Traceable Expenses	$      2,932,750	$      1,435,000	$      475,700	$                    635,100	$                         386,950
Division Segment Margin	$         449,750	$         197,000	$      147,300	$                      67,400	$                            38,050
Common Expenses NOT tracable to Segment:
Salaries (working-2)-Corporate Staff	$            91,000
Personnel Cost (working-2)-Corporate Staff	$            22,750
Occupancy Cost (working-3)-Corporate Staff	$            45,000
Postage and Shipping (working-4)-Corporate Staff	$            47,000
General Admin exp	$            33,000
Common Expenses NOT tracable to Segment:	$         238,750
Excess of revenues over expense (Margin- Untraceable Exp)	$         211,000

Working-1	Revenue	Membership	Magazine	Total
	Total Member			20,400
	Per Unit Price	$                    80	$                                 20	$                                              100
	Total Revenue	$      1,632,000	$                      408,000	$                                  2,040,000
Working-2	Salary and Personnel Cost
		Salary	Personnel Cost
			25% of Salary
	Membership	$         224,000	$                         56,000
	Magazine Subs	$         160,000	$                         40,000
	Books and Reports	$         314,000	$                         78,500
	Continuing Education	$         193,000	$                         48,250
	Corporate Staff	$            91,000	$                         22,750
		$         982,000	$                      245,500
Working-3	Occupancy Cost
		Space	Allocation based on Space ($209,000-$59,000)=$150,000	Direct Allocation ($59,000)	Total
	Membership	3,000	$                         45,000		$                  45,000
	Magazine Subs	1,000	$                         15,000		$                  15,000
	Books and Reports	1,000	$                         15,000	$                                        59,000	$                  74,000
	Continuing Education	2,000	$                         30,000		$                  30,000
	Corporate Staff	3,000	$                         45,000		$                  45,000
		10,000	$                      150,000	$                                        59,000	$                209,000
Working-4	Printing and Paper
			Per Unit	Total Paper	Per Unit Postage	Total Postage
	Membership
	Magazine Subs	23,700	$                                   7	$                                     165,900	$                             4	$           94,800
	Books and Reports	28,100	$                                   4	$                                     112,400	$                             2	$           56,200
	Continuing Education (Total-books-Subs)			$                                        41,700
	Corporate Staff (Total-books-Subs)					$           47,000
				$                                     320,000		$         198,000