Question

Niangua Co. is divided into three segments and is interested in preparing a segmented income statement in order to better understand the operating performance of each segment. Fixed expenses in each division currently include an allocation of general corporate expenses equal to 20% of the division's sales.

	Division 1			Division 2				Division 3
Sales	$	320,000		$	200,000			$	280,000
Variable expenses		208,000			120,000				152,000
Contribution margin	$	112,000		$	80,000			$	128,000
Fixed expenses		80,000			88,000				72,000
Net income (loss)	$	32,000		$	(8,000	)		$	56,000

(a.) Complete the following segmented income statement for Niangua Co.

	Total Company	Division 1	Division 2	Division 3
Sales
Variable expenses
Contribution margin
Direct fixed expenses
Segment margin
Common fixed expenses
Net income (loss)

Answer 1

Solution

	Total Company	Division 1	Division 2	Division 3
Sales	$ 800,000.00	$    320,000.00	$ 200,000.00	$280,000.00
Variable expenses	$ 480,000.00	$    208,000.00	$ 120,000.00	$152,000.00
Contribution margin	$ 320,000.00	$    112,000.00	$    80,000.00	$128,000.00
Direct fixed expenses	$    80,000.00	$      16,000.00	$    48,000.00	$ 16,000.00
Segment margin	$ 240,000.00	$      96,000.00	$    32,000.00	$112,000.00
Common fixed expenses	$ 160,000.00
Net income (loss)	$    80,000.00

Working

	Division 1	Division 2	Division 3
Total fixed overhead	$        80,000.00	$      88,000.00	$   72,000.00
Fixed overhead allocated	$      64,000.00	$    40,000.00	$ 56,000.00
Direct fixed expenses	$        16,000.00	$      48,000.00	$   16,000.00