PROBLEM 6-21 Segment Reporting and Decision-Making L06-4) Vulcan Company's contribution format income statement for June is given below: Vulcan Company Income Statement For the Month Ended June 30 Sales ........ Variable expenses ...... Contribution margin ......... Fixed expenses ........... Net operating income. $750,000 336,000 414,000 378,000 $ 36,000 Management is disappointed with the company's performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the folio a. The company is divided into two sales territories—Northern and Southern. The Northern ter- ritory recorded $300,000 in sales and $156,000 in variable expenses during June; the remain- ing sales and variable expenses were recorded in the Southern territory. Fixed expenses of $120,000 and $108,000 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 products—Paks and Tibs. Sales of Paks and Tibs totaled $50,000 and $250,000, respectively, in the Northern territory during June. Vari- able expenses are 22% of the selling price for Paks and 58% for Tibs. Cost records show that $30,000 of the Northern territory's fixed expenses are traceable to Paks and $40,000 to Tibs, with the remainder common to the two products. Required: 1. Prepare contribution format segmented income statements first showing the total company broken down between sales territories and then showing the Northern territory broken down by product line. In addition, for the company as a whole and for each segment, show each item on the segmented income statements as a percent of sales. 2. Look at the statement you have prepared showing the total company segmented by sales terri- tory. What insights revealed by this statement should be brought to the attention of management? 3. Look at the statement you have prepared showing the Northern territory segmented by product lines. What insights revealed by this statement should be brought to the attention of management?
Related questions
| Vulcan Companyâs contribution format income statement for June is given below: |
| Vulcan Company Income Statement For the Month Ended June 30 | ||||
| Sales | $ | 900,000 | ||
| Variable expenses | 400,000 | |||
| Contribution margin | 500,000 | |||
| Fixed expenses | 475,000 | |||
| Net operating income | $ | 25,000 | ||
| Management is disappointed with the companyâs 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 territoriesâNorthern and Southern. The Northern Territory recorded $400,000 in sales and $160,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $176,000 and $140,000 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 productsâPaks and Tibs. Sales of Paks and Tibs totaled $140,000 and $260,000, respectively, in the Northern territory during June. Variable expenses are 27% of the selling price for Paks and 47% for Tibs. Cost records show that $67,200 of the Northern Territoryâs fixed expenses are traceable to Paks and $57,200 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)) |
| 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)) |
| Vulcan Companyâs contribution format income statement for June is given below: |
| Vulcan Company Income Statement For the Month Ended June 30 | ||||
| Sales | $ | 900,000 | ||
| Variable expenses | 400,000 | |||
| Contribution margin | 500,000 | |||
| Fixed expenses | 475,000 | |||
| Net operating income | $ | 25,000 | ||
| Management is disappointed with the companyâs 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 territoriesâNorthern and Southern. The Northern Territory recorded $400,000 in sales and $160,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $176,000 and $140,000 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 productsâPaks and Tibs. Sales of Paks and Tibs totaled $140,000 and $260,000, respectively, in the Northern territory during June. Variable expenses are 27% of the selling price for Paks and 47% for Tibs. Cost records show that $67,200 of the Northern Territoryâs fixed expenses are traceable to Paks and $57,200 to Tibs, with the remainder common to the two products. 1.) 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))
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2.)
| 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))
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Vulcan Companyâs 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 | 450,000 | ||
| Net operating income | $ | 50,000 | |
Management is disappointed with the companyâs performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following:
The company is divided into two sales territoriesâNorthern and Southern. The Northern Territory recorded $300,000 in sales and $150,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $123,000 and $100,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories.
The company is the exclusive distributor for two productsâPaks and Tibs. Sales of Paks and Tibs totaled $105,000 and $195,000, respectively, in the Northern territory during June. Variable expenses are 24% of the selling price for Paks and 64% for Tibs. Cost records show that $52,500 of the Northern Territoryâs fixed expenses are traceable to Paks and $40,950 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. (Do not round your intermediate percentage answers and round your final percentage answers to 1 decimal place (i.e. .1234 should be entered as 12.3).)
1b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line. (Do not round your intermediate percentage answers and round your final percentage answers to 1 decimal place (i.e. .1234 should be entered as 12.3).)
