The Almer Sales Company has two divisions. The following information is available for the year ended December

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The Almer Sales Company has two divisions. The following information is available for the year ended December 31, 2004:

The sales for Almer are \($300,000\) for the Eastern Division and \($200,000\) for the Western Division. Variable costs for the Eastern Division are \($250,000\), whereas variable costs for the Western Division are \($170,000\). Direct fixed costs of the Eastern Division are \($20,000\) and direct fixed costs of the Western Division are \($15,000\). The Almer Company allocates common fixed costs to segments based on relative sales. Common fixed costs for the company are $25,000.

Required:

a. Prepare a segment income statement for the company, which distributes common fixed costs to segments based on relative sales. Your answer should include a column for the total company and columns for each segment.

b. Do you think it is wise to evaluate the performance of a business segment based on income that includes an allocation for common fixed costs? Why or why not?

c. Prepare a segment income statement for the company, which does not distribute common fixed cost to segments. Your answer should include a column for the total company and columns for each segment.

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