Michaels Company segments its income statement into its East andWest Divisions. The companyâs overall sales, contribution marginratio, and net operating income are $610,000, 51%, and $53,000,respectively. The West Divisionâs contribution margin andcontribution margin ratio are $157,000 and 74%, respectively. TheEast Divisionâs segment margin is $77,000. The company has $54,000of common fixed costs that cannot be traced to either division.
Required: Prepare an income statement for Michaels Company that uses thecontribution format and is segmented by divisions. (Inputall amounts as positive values except losses which should beindicated by a minus sign. Round your percentage answers to 1decimal place and all other answers to the nearest dollaramount.)
Divisions
Total Company
East
West
Amount % Amount % Amount % (Click to select)Variable expensesContributionmarginTraceable fixed expensesTerritorial segment marginNetoperating income (loss)SalesCommon fixed expenses $ $ $ (Click to select)Variable expensesSalesTerritorialsegment marginCommon fixed expensesTraceable fixedexpensesContribution marginNet operating income (loss) (Click to select)Gross marginContribution margin (Click to select)Traceable fixed expensesNet operatingincome (loss)Territorial segment marginCommon fixedexpensesSalesVariable expensesContribution margin (Click to select)Territorial segment marginTraceablefixed expensesCommon fixed expensesVariable expensesContributionmarginNet operating income (loss)Sales $ $ (Click to select)Traceable fixed expensesNet operatingincome (loss)SalesCommon fixed expensesTerritorial segmentmarginContribution marginVariable expenses (Click to select)Net operating incomeNet operatingloss $
Michaels Company segments its income statement into its East andWest Divisions. The companyâs overall sales, contribution marginratio, and net operating income are $610,000, 51%, and $53,000,respectively. The West Divisionâs contribution margin andcontribution margin ratio are $157,000 and 74%, respectively. TheEast Divisionâs segment margin is $77,000. The company has $54,000of common fixed costs that cannot be traced to either division.
| Required: |
Prepare an income statement for Michaels Company that uses thecontribution format and is segmented by divisions. (Inputall amounts as positive values except losses which should beindicated by a minus sign. Round your percentage answers to 1decimal place and all other answers to the nearest dollaramount.) |
Divisions | ||||||
Total Company | East | West | ||||
| Amount | % | Amount | % | Amount | % | |
| (Click to select)Variable expensesContributionmarginTraceable fixed expensesTerritorial segment marginNetoperating income (loss)SalesCommon fixed expenses | $ | $ | $ | |||
| (Click to select)Variable expensesSalesTerritorialsegment marginCommon fixed expensesTraceable fixedexpensesContribution marginNet operating income (loss) | ||||||
| (Click to select)Gross marginContribution margin | ||||||
| (Click to select)Traceable fixed expensesNet operatingincome (loss)Territorial segment marginCommon fixedexpensesSalesVariable expensesContribution margin | ||||||
| (Click to select)Territorial segment marginTraceablefixed expensesCommon fixed expensesVariable expensesContributionmarginNet operating income (loss)Sales | $ | $ | ||||
| (Click to select)Traceable fixed expensesNet operatingincome (loss)SalesCommon fixed expensesTerritorial segmentmarginContribution marginVariable expenses | ||||||
| (Click to select)Net operating incomeNet operatingloss | $ | |||||
Related questions
| Shannon Company segments its income statement into its North and South Divisions. The companyâs overall sales, contribution margin ratio, and net operating income are $480,000, 60%, and $48,000, respectively. The North Divisionâs contribution margin and contribution margin ratio are $135,000 and 75%, respectively. The South Divisionâs segment margin is $38,000. The company has $72,000 of common fixed expenses that cannot be traced to either division. |
| Required: |
| Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3)) |
Toxaway Company is a merchandiser that segments its businessinto two divisionsâCommercial and Residential. The companyâsaccounting intern was asked to prepare segmented income statementsthat the companyâs divisional managers could use to calculate theirbreak-even points and make decisions. She took the prior monthâscompanywide income statement and prepared the absorption formatsegmented income statement shown below: |
| Total Company | Commercial | Residential | |||||||
| Sales | $ | 915,000 | $ | 305,000 | $ | 610,000 | |||
| Cost of goodssold | 585,600 | 152,500 | 433,100 | ||||||
| Gross margin | 329,400 | 152,500 | 176,900 | ||||||
| Selling andadministrative expenses | 284,000 | 126,000 | 158,000 | ||||||
| Net operatingincome | $ | 45,400 | $ | 26,500 | $ | 18,900 | |||
In preparing these statements, the intern determined thatToxawayâs only variable selling and administrative expense is a 10%sales commission on all sales. The companyâs total fixed expensesinclude $70,500 of common fixed expenses that would continue to beincurred even if the Commercial or Residential segments arediscontinued, $50,000 of fixed expenses that would be avoided ifthe Residential segment is dropped, and $72,000 of fixed expensesthat would be avoided if the Commericial segment is dropped. |
| Required: |
| 1. | Do you agree with the internâs decision to use an absorptionformat for her segmented income statement? | ||||
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| 2-a. | Based on the internâs segmented income statement, can youdetermine how she allocated the companyâs common fixed expenses tothe Commercial and Residential segments? |
| 2-b. | Do you agree with her decision to allocate the common fixedexpenses to the Commercial and Residential segments? | ||||
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| 3. | Redo the internâssegmented income statement using the contribution format. |
| 4. | Compute the companywide break-even point in dollar sales?(Round intermediate calculations to 3 decimal places andfinal answer to the nearest whole dollar amount.) |
| 5. | Compute the break-even point in dollar sales for the CommercialDivision and for the Residential Division. (Round CM ratioto 2 decimal places and final answers to the nearest whole dollaramount.) |
| 6. | Assume the company decided to pay its sales representatives inthe Commercial and Residential Divisions a total monthly salary of$22,000 and $44,000, respectively, and to lower its companywidesales commission percentage from 10% to 5%. Calculate the newbreak-even point in dollar sales for the Commercial Division andthe Residential Division. (Round CM ratio to 2 decimalplaces and final answers to the nearest whole dollaramount.) |
