Question

Problem 6-21 (Static) Segment Reporting and Decision-Making (LO6-4] Vulcan Company's contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 750,000 Variable expenses 336,000 Contribution margin 414,000 Fixed expenses 378,000 Net operating income $ 36,000 Management is disappointed with the company's performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following: a. The company is divided into two sales territories-Northern and Southern. The Northern territory recorded $300,000 in sales and $156,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern territory. Fixed expenses of $120,000 and $108,000 are traceable to the Northern and Southern territories, respectively. The rest of the fixed expenses are common to the two territories b. The company is the exclusive distributor for two products--Paks and Tibs. Sales of Paks and Tibs totaled $50,000 and $250,000, respectively, in the Northern territory during June. Variable expenses are 22% of the selling price for Paks and 58% for Tibs. Cost records show that $30,000 of the Northern territory's fixed expenses are traceable to Paks and $40,000 to Tibs, with the remainder common to the two products. Required: 1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories. 1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line. Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Prepare contribution format segmented income statements for the total company broken down between sales territories. (Round the percentage answers to one decimal place (.e.1234 should be entered as 12.3).) Sales Territory Southern Total Company Amount Northern Amount 46 Amount % 0.0 0 0.0 0 0.0 0.0 $ 0 0.0 S 0 0.0 S 0 0.0 Req 18>

Answer 1

1-a.
			Sales territory
	Total company	Northern	Southern
	Amount	%	Amount	%	Amount	%
Sales	750000	100.0%	300000	100.0%	450000	100.0%
Variable expenses	336000	44.8%	156000	52.0%	180000	40.0%
Contribution margin	414000	55.2%	144000	48.0%	270000	60.0%
Traceable fixed expenses	228000	30.4%	120000	40.0%	108000	24.0%
Territorial segment margin	186000	24.8%	24000	8.0%	162000	36.0%
Common fixed expenses ( 378000 - 228000 )	150000	20.0%
Net operating income	36000	4.8%

1-b.
			Product line
	Northern Territory	Paks	Tibs
	Amount	%	Amount	%	Amount	%
Sales	300000	100.0%	50000	100.0%	250000	100.0%
Variable expenses	156000	52.0%	11000	22.0%	145000	58.0%
Contribution margin	144000	48.0%	39000	78.0%	105000	42.0%
Traceable fixed expenses	70000	23.3%	30000	60.0%	40000	16.0%
Product line segment margin	74000	24.7%	9000	18.0%	65000	26.0%
Common fixed expenses ( 120000 - 70000 )	50000	16.7%
Sales territory segment margin	24000	8.0%