50.1K

Verified Solution

Link Copied!

Vulcan Companys contribution format income statement for June is given below:

Vulcan Company Income Statement For the Month Ended June 30
Sales	$	800,000
Variable expenses		300,000
Contribution margin		500,000
Fixed expenses		475,000
Net operating income	$	25,000

Management is disappointed with the companys 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 territoriesNorthern and Southern. The Northern Territory recorded $400,000 in sales and $220,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $156,000 and $100,000 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 productsPaks and Tibs. Sales of Paks and Tibs totaled $100,000 and $300,000, respectively, in the Northern territory during June. Variable expenses are 25% of the selling price for Paks and 65% for Tibs. Cost records show that $45,000 of the Northern Territorys fixed expenses are traceable to Paks and $75,000 to Tibs, with the remainder common to the two products.

Required:

1a.	Prepare contribution format segmented income statements for the total company broken down between sales territories. (Round the percentage answers to one decimal place (i.e .1234 should be entered as 12.3))
	Sales Territory Total Company Northern Southern Amount % Amount % Amount % Sales $800,000 100.0 $400,000 100.0 $400,000 100,000.0 Variable expenses 300,000 220,000 Contribution margin 500,000 100.0 180,000 100.0 400,000 100,000.0 Traceable fixed expenses Territorial segment margin 500,000 100.0 $180,000 100.0 $400,000 100,000.0 Common fixed expenses Net operating income $500,000 100.0

1b.	Prepare contribution format segmented income statements for the Northern Territory broken down by product line. (Round the percentage answers to one decimal place (i.e .1234 should be entered as 12.3))

	Product Line Northern Territory Paks Tibs Amount % Amount % Amount % Sales Variable expenses 25.0 65.0 Contribution margin 0 0.0 0 (25.0) 0 (65.0) Traceable fixed expenses 45,000 Product line segment margin 0 0.0 $(45,000) (25.0) $0 (65.0) Common fixed expenses Sales territory segment margin $0 0.0

Answer & Explanation Solved by verified expert

See Answer