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 $500,000, 46%, and $10,000, respectively. The North Division’s contribution margin and contribution margin ratio are $150,000 and 50%, respectively. The South Division’s segment margin is $30,000. The company has $90,000 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. (Do not round your intermediate percentage answers and round your final percentage answers to 1 decimal place (i.e. .1234 should be entered as 12.3))

Answer 1

		Divisions
	Total Company		North		South
	Amount	%	Amount	%	Amount	%
Sales	500000	100.0%	300000	100.0%	200000	100.0%
Variable expenses	270000	54.0%	150000	50.0%	120000	60.0%
Contribution margin	230000	46.0%	150000	50.0%	80000	40.0%
Traceable fixed expenses	130000	26.0%	80000	26.7%	50000	25.0%
Territorial segment margin	100000	20.0%	70000	23.3%	30000	15.0%
Common fixed expenses	90000	18.0%
Net operating income	10000	2.0%