Question

EXERCISE 6-7 Segmented Income Statement [LO6-4 Shannon Company segments its income statement into its North and South Divisions. The pany's overall sales, contribution margin ratio, and net operating income are $500,000 46%, and S10,000, respectively. The North Division's contribution margin and contribution margin ratio $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 seg- mented by divisions. In addition, for the company as a whole and for each segment, show each com are item on the segmented income statements as a percent of sales.

Answer 1

Segmented income statement

	Total Company		North division		South division
	Amount	%	Amount	%	Amount	%
Sales	500000	100%	300000	100%	200000	100%
Variable cost	270000	54%	150000	50%	120000	60%
Contribution margin	230000	46%	150000	50%	80000	40%
Traceable fixed cost	130000	26%	80000	26.7%	50000	25%
Segment margin	100000	20%	70000	23.3%	30000	15%
Common Fixed expense	90000	18%
Net operating income	10000	2%