Digital Software, Inc., has two product lines. The income statement for the year ended December 31 shows the following:

The products, Num 1 and Num 2, are sold in two territories,
North and South, as follows:

The common fixed expenses are traceable to each territory as follows:
North fixed expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,000
South fixed expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
Home office administrative fixed expenses . . . . . . . . . . . . 20,000
Total common fixed expenses . . . . . . . . . . . . . . . . . . . . . $120,000
The direct expenses of Num 1, $160,000, and of Num 2, $140,000, are not identifiable with either of the two territories.
Required:
1. Prepare income statements for the year, segmented by territory and including a column for the entire company.
2. Why are direct expenses of one type of segment report not direct expenses of another type of segmentreport?

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Janitorial Products, Inc. Income Statement Total Brooms Mops Sales Less variable expenses6 Contribution margin. S 400,000 $180,000 Less direct fixed costs Segmentmargin... Less common fixed costs Net income .$1,000,000 S600,000 100% 70 0 $400,000 180,000 100% 600,000 420,000 45 2o$220,000 150,000 S 70,000 200,000 50,000 S 200,000 $130,000 120,000 $ 80,000 East S400,000 200,000 West $200,000 200,000 Brooms Mops. Total