Mow-It Inc. manufactures two products, mowers and trimmers, which are sold in two territories designated by the company as East Territory and West Territory. The following income statement prepared for the company shows the product-line segments.

The territorial product sales are as follows:

The direct fixed costs of mowers ($50,000) and trimmers ($150,000) are not identifiable with either of the two territories. The common fixed costs are partially identifiable with East Territory, West Territory, and the general administration as follows:
East Territory................................. $ 54,000
West Territory ................................ 36,000
General administration....................... 30,000
Total common fixed costs ................. $120,000
Required:
1. Prepare a segmented income statement by territories. The direct fixed costs of the product lines should be treated as common fixed costs on the segmented statement being prepared.
2. What is the significance of this analysis?

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Mow-It Inc. Income Statement Total Trimmers $400,000 600,000 420,000 70 180,000 Mowers $1,000,000 $600,000 100% 100% 45 Contribution margin $400,000 $180,000 30% $220,000 55% 150,000 200,000 200,000 $130,000 120,000 50,000 $70,000 Less common fixed costs 80,000 East West $400,000 $200,000 200,000 200,000 $600,000 $400,000 Mowers