California Bread Company bakes three products: donuts, bread, and pasteries. It sells them in the cities of San Francisco and San Jose. For March, its first month of operation, the following income statement was prepared:

Sales and selected variable expense data are as follows:

The fixed selling expenses were \($770\) for March, of which \($320\) was a direct expense of the San Francisco market and \($450\) was a direct expense of the San Jose market. Fixed administrative expenses were \($260\), which management has decided not to allocate when using the contribution approach.
Required

a. Prepare a segment income statement showing the territory margin for each sales territory for March. Include a column for the entire firm.

b. Prepare segment income statements showing the product margin for each product. Include a column for the entire firm.

c. If the pastries line is dropped and fixed baking expenses do not change, what is the product margin for donuts and bread?

d. What other type of segmentation might be useful to California Bread. Explain

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CALIFORNIA BREAD COMPANY Territory and Company Income Statements For Month of March San Francisco San Jose Total Sales.... $4,200 $1,000 $5,200 Cost of goods sold. (3,000) (600) (3,600) Gross profit... 1,200 400 Selling and administrative expenses (800) (450) Net income... $ 400 $ (50) 1,600 (1,250) $ 350