Question

Music Teachers, Inc., is an educational association for music teachers that has 20,300 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	$	3,376,800
Expenses:
Salaries		982,000
Personnel costs		245,500
Occupancy costs		220,000
Reimbursement of member costs to local chapters		530,000
Other membership services		590,000
Printing and paper		325,000
Postage and shipping		204,000
Instructors’ fees		74,000
General and administrative		34,000
Total expenses		3,204,500
Excess of revenues over expenses	$	172,300

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 20,300 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 3,100 one-year subscriptions to Teachers’ Forum were also sold last year to nonmembers and libraries at $38 per subscription. In addition to subscriptions, the journal generated $104,000 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 28,600 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 2,500 students. A total of 1,780 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	$	215,000		3,000
Magazine Subscriptions		150,000		1,000
Books and Reports		326,000		1,000
Continuing Education		197,000		2,000
Corporate staff		94,000		3,000
Total	$	982,000		10,000

Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $220,000 in occupancy costs includes $53,000 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.

Music Teachers, Inc. Segmented Income Statement For the year ended November 30 Association Total Division Magazine Subscriptions Books & Reports Continuing Education Membership Sales: $ 20,300 Membership dues Non-member journal subscriptions Reports and texts Advertising Total revenues 20, 3000 0 Expenses traceable to segments: Printing and paper Postage and shipping Salaries Personnel costs Occupancy costs Instructors' fees Total traceable expenses 0 20,300 0 0 0 0 0 0 $ $ $ $ 0 able to divisions Common expenses not traceable to divisions: Salaries-corporate staff Personnel costs General and administrative Occupancy costs Postage and shipping Reimbursement of member costs to local chapters Total common expenses Excess of revenues over expenses $ 20,300

Answer 1

Music Teachers Inc
Segmented Income statement
For year Ended Nov 30
	Division
	Association Total	Membership	Magazine Subscription	Books & Reports	Continuing Education
Sales:-
Membership Dues	2,030,000	1,624,000	406,000
Journal- Non Member	117,800		117,800
Advertising	104,000		115,000
Reports & text	715,000			715,000
Continuing Courses	410,000				410,000
Total revenue	3,376,800	1,624,000	638,800	715,000	410,000
Expenses:-
Salaries	888,000	215,000	150,000	326,000	197,000
Personnel Cost	222,000	53,750	37,500	81,500	49,250
Occupancy cost	169,900	50,100	16,700	69,700	33,400
Reimbursement of member cost	530,000	530,000
Other membership service	590,000	590,000
Printing & paper	325,000		187,200	114,400	23,400
Postage & shipping	150,800		93,600	57,200
Instructor Fees	74,000				74,000
Total Traceable Expenses	2,949,700	1,438,850	485,000	648,800	377,050
	427,100	185,150	153,800	66,200	32,950
Common Expenses
Salaries- Corporate staff	94,000
Personnel Cost	23,500
Occupancy cost	50,100
Postage & shipping	53,200
General Administration	34,000
Total Common Expenses	254,800
Excess of revenue over expenses	172,300