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EXERCISE 6-4 Basic Segmented Income Statement L LO6-4 Royal Lawncare Company produces and sells two packaged products-Weedban and Greengrow. Revenue and cost information relating to the products follow: Product Weedban Greengrow Selling price per unit $6.00 $7.50 Variable expenses per unit $2.40 $5.25 Traceable fixed expenses per year $45,000 $21,000 Last year the company produced and sold 15,000 units of Weedban and 28,000 units of Greengrow. Its annual common fixed Page 280 expenses are $33,000. Required: Prepare a contribution format income statement segmented by product lines.EXERCISE 65 Companywide and Segment Break-Even Analysis LOG5 Piedmont Company segments its business into two regionsNorth and South. The company prepared the contribution format segmented income statement as shown below: Total Company North South Sales $600,000 $400,000 $200,000 Variable expenses 360,000 280,000 80,000 Contribution margin 240,000 120,000 120,000 Traceable xed expenses 120,000 60,000 60,000 Segment margin 120,000 $ 60,000 $ 60,000 Common xed expenses 50,000 Net operating income $ 70,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in dollar sales for the North region. 3. Compute the breakeven point in dollar sales for the South region. EXERCISE 611 Segmented Income Statement LOG4 Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement: Sales $1,000,000 Variable expenses 390,000 Contribution margin 610,000 Fixed expenses 625,000 Net operating income (loss) $ 15,000) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly, the Accounting Department has developed the following information: Division East Central We st Sales $250,000 $400,000 $350,000 Variable expenses as a percentage of sales 52% 30% 40% Traceable xed expenses $160,000 $200,000 $175,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2. The Marketing Department has proposed increasing the West Division's monthly advertising by $15,000 based on the belief that it would increase that division's sales by 20%. Assuming these estimates are accurate, how much would the company's net operating income increase (decrease) if the proposal is implemented? EXERCISE 6-16 Working with a Segmented Income Statement; Break-Even Analysis LI LO6-4, LO6-5 Raner, Harris & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices- one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company's most recent year is given: Office Total Company Chicago Minneapolis Sales $450,000 100% $150,000 100% $300,000 100% Variable expenses 225,000 50% 45,000 30% 180,000 60% Contribution margin 225,000 50% 105,000 70% 120,000 40% Traceable fixed expenses 126,000 28% 78,000 52% 48,000 16% Office segment margin 99,000 22% $ 27,000 18% $ 72,000 24% Common fixed expenses not traceable to offices 63,000 14% Net operating income $ 36,000 8%Required: 1. Compute the companywide break-even point in dollar sales. Also, compute the break-even point for the Chicago ofce and for the Minneapolis ofce. Is the companywide break-even point greater than, less than, or equal to the sum of the Chicago and Minneapolis break-even points? Why? 2. By how much would the company's net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns. 3. Refer to the original data. Assume that sales in Chicago increase by $50,000 next year and that sales in Minneapolis remain unchanged. Assume no change in xed costs. 21. Prepare a new segmented income statement for the company using the above format. Show both amounts and percentages. b. Observe from the income statement you have prepared that the contribution margin ratio for Chicago has remained unchanged at 70% (the same as in the above data) but that the segment margin ratio has changed. How do you explain the change in the segment margin ratio? EXERCISE 617 Working with a Segmented Income Statement LO64 Refer to the data in Exercise 6-16. Assume that Minneapolis' sales by major market are: Market Minneapolis Medical Dental Sales $300,000 100% $200,000 100% $100,000 100% Variable expenses 180,000 60% 128,000 64% 52,000 52% Contribution margin 120,000 40% 72,000 36% 48,000 48% Traceable xed expenses 33,000 11% 12,000 6% 21,000 21% Market segment margin 87,000 29% $ 60,000 30% $ 27,000 27% Common xed expenses not traceable to markets 15,000 _5% Oice segment margin $ 72,000 2=4% The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,000. Marketing studies indicate that such a campaign would increase sales in the Medical market by $40,000 or increase sales in the Dental market by $35,000. Page 285 Required: 1. How much would the company's prots increase (decrease) if it implemented the advertising campaign in the Medical Market? 2. How much would the company's prots increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign? 4. In Exercise 6-16, Minneapolis shows $48,000 in traceable xed expenses. What happened to the $48,000 in this exercise