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 $780,000, 46%, and $15,600, respectively. The North Division’s contribution margin and contribution margin ratio are $140,000 and 50%, respectively. The South Division’s segment margin is $90,000. The company has $140,400 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 (i.e .1234 should be entered as 12.3).)

Answer 1

Division
	Total company		North		South
	Amount	%	Amount	%	Amount	%
Sales	780,000	100%	280000	100%	500,000	100%
Variable expenses	421,200	54%	140,000	50%	281,200	56%
Contribution margin	358800	46%	140,000	50%	218,800	44%
Traceable fixed expenses	202,800	26%	74,000	26%	128,800	26%
Territorial segment margin	156,000	20%	66,000	24%	90,000	18%
Common fixed expenses	140,400	18%
Net operating income	15,600	2%