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Required:

a. Prepare an income statement for July segmented by product line. Include a column for the entire

firm.

b. Prepare an income statement for July segmented by sales territory. Include a column for the entire

firm.

c. Prepare an income statement for July by product line for The Americas sales territory. Include a

column for the territory as a whole.

d. Discuss the value of multilevel segment reporting as a managerial tool. Compare and contrast the

benefits of the reports generated in parts a, b, and c

Problem:

Communications, Incorporated, sells telecommunication products throughout the world in three sales territories: Europe, Asia, and the Americas. For July, all $650,000 of administrative expense is traceable to the territories, except $100,000, which is common to all units and cannot be traced or allocated to the sales territories. The percentage of product line sales made in each of the sales territories and the assignment of traceable fixed expenses follow:
Sales Territory
	Europe	Asia	The Americas	Total
Handset Sales	50%	30%	20%	100%
Switchboard Sales	40	40	20	100
Automated Switches Sales	10	30	60	100
Fixed Administrative Expense	$200,000	$200,000	$150,000	$550,000
Fixed Selling Expense	$350,000	$650,000	$650,000	$1,650,000
The manufacturing takes place in one large facility with three distinct manufacturing operations. Selected product-line cost data follow:
	Handsets	Switchboard	Automated Switches	Total
Variable Costs	$18	$790	$1,975
Depreciation and Supervision	200,000	200,000	170,000	$600,000*
Other manufacturing Overhead (Common)				150,000
Fixed Administrative Expense (Common)				1,550,000
Fixed Selling Expense (Common)
*Includes common cost of $30,000
			Unit Sales	Selling Price
Handset			10,500	$50
Switchboard			2,500	1,500
Automated			2,000	3,200

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