Question

Part 4 Minnesota Bread Company bakes 3 products: donuts, bread, and pastries. It sells them in the cities of Minneapolis and St. Paul. For March, its first month of operation, the following income statement was prepared, which has a functional approach and allocated the common fixed costs to the 2 Territories equally. Minnesota Bread Company Territory and Company Income Statements For Month of March $ Sales Cost of Goods sold Gross profit Selling and Administrative expenses Minneapolis $ 2,200 (1500) 700 (400) $ 300 St. Paul 700 (325) 375 (500) (125) Total 2,900 (1825) 1075 (900) 175 Net Income Sales and selected variable expense data are as follows: Donuts $950 $300 Products Bread $900 $250 Pastries $350 $150 $2,200 $700 Sales in Minneapolis Sales in St. Paul Variable baking expenses as a percentage of sales Variable selling expenses as a percentage of sales Fixed baking expenses-direct 40% 50% 60% 6% 5% $323 4% $200 $377 Fixed selling and Administrative expenses-common unallocated $312 Required: Prepare a segment income statements showing the product margin for each product. Include a column for the entire company You need to use cell references to earn credit. Please use the template below:

Answer 1

1.

Income Statement (product wise segmented)

	Donuts	Bread	Pastries	Company
Sales in Miinneapolis	950	900	350	2200
Sales in St Paul	300	250	150	700
Total Sales	1250	1150	500	2900
Variable expenses
Baking	500	575	300	1375
Selling	62.5	46	30	138.5
Contribution	687.5	529	170	1386.5
Fixed Baking expense	323	200	377	900
Product Margin	364.5	329	-207	486.5
Un-allocated Fixed Selling				312
Net Income				174.5

2. Since company have dual segment ie one based on location and other based on product, company can first segment income statement based on locality and then segment each locality by each product. This can help the company to valuate on the basis of each product's performance in every location.

Since the question also requires cell-reference, providing you the cell reference used to compute above solution in excel sheet:

	A	B	C	D	E
1		Donuts	Bread	Pastries	Company
2	Sales in Miinneapolis	950	900	350	=SUM(B2:D2)
3	Sales in St Paul	300	250	150	=SUM(B3:D3)
4	Total Sales	=SUM(B2:B3)	=SUM(C2:C3)	=SUM(D2:D3)	=SUM(B4:D4)
5	Variable expenses
6	Baking	=B4*40%	=C4*50%	=D4*60%	=SUM(B6:D6)
7	Selling	=B4*5%	=C4*4%	=D4*6%	=SUM(B7:D7)
8	Contribution	=B4-B6-B7	=C4-C6-C7	=D4-D6-D7	=SUM(B8:D8)
9	Fixed Baking expense	323	200	377	=SUM(B9:D9)
10	Product Margin	=B8-B9	=C8-C9	=D8-D9	=SUM(B10:D10)
11	Unallocated Fixed Selling				312
12	Net Income				=E10-E11