Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry-and wet-vacuuming capabilities. Model 3 is the heavy-duty riding shampooer sold to hotels and convention centers. A segmented income statement is shown below.
Model1 Model2 Model3 Total
Sales $230,000 $578,000 $633,500 $1,441,500
Less variable costs of goods sold (89,500) (173,320) (362,000) (624,820)
Less commissions (5,000) (37,500) (23,000) (65,500)
While all models have positive contribution margins, Reshier Company is concerned because operating income is less than 10 percent of sales and is low for this type of company. The company's controller gathered additional information on fixed costs to see why they were so high. The following information on activities and drivers was gathered:
Driver Usage by Model
Activity Activity Cost Activity Driver Model 1 Model 2 Model 3
Engineering $86,000 Engineering hours 760 79 161
Setting up 187,000 Setup hours 12,900 12,600 29,161
Customer service 114,000 Service calls 14,400 1,560 19,161
In addition, Model 1 requires the rental of specialized equipment costing $18,000 per year.
1.Reformulate the segmented income statement using the additional information on activities. Use a minus sign to indicate any negative margins. Do NOT round interim calculations and, if required, round your answer to the nearest dollar. If amount box does not require an entry, leave it blank or enter "0".
Reshier Company
Segmented Income Statemen
Model 1 Model 2 Model 3 Total
Sales $__________ _________ ________ ______
Less variable cost of goods sold _____________ ___________ __________ __________
Less commissions ____________ ___________ ___________ ________
