1. List at least two disadvantages or weaknesses that you see in the statement format above. Include the regional and corporate expenses in your discussion.

2. Explain the basis that is apparently being used to allocate the corporate expenses to the regions. Specifically discuss advertising and general expenses. Do you agree with these allocations? Why or why not? Explain.

Review the statement by region and assume that corporate expenses were not allocated to the sales regions. List at least four points, suggestions which, in your view, might help to improve the companys performance and profitability, and should be brought to managements attention?

DFO3 (Problem and Questions) Analyzing a Segmented Income Statement PROBLEM (Based on textbook P4-26 MODIFIED) Losses have been incurred at Millard Corporation for some time. In an effort to isolate the problem and improve the company's performance, management has requested that the monthly income statement be segmented by sales region. The company's first effort at preparing a segmented statement is given below. Notice there is no total column. This statement is for May, the most recent month of activity. Sales Region Central $800,000 East $750,000 West Sales.... $450,000 Regional expenses (traceable): Cost of goods sold. 162,900 Advertising........ 108,000 Salaries... 90,000 Utilities. 13,500 Depreciation........... 27,000 Shipping expense.... 17,100 Total regional expenses..... 418,500 Regional income (loss) before corporate expenses................ 31,500 Corporate expenses: Advertising (general).......... 18,000 General administrative expense.............. 50,000 Total corporate expenses... 68,000 Net operating income (loss).............. $(36,500) 280,000 200,000 88,000 12,000 28,000 32,000 640,000 376,500 210,000 135,000 15,000 30,000 28,500 795,000 160,000 (45,000) 32,000 50,000 82,000 $ 78,000 30,000 50,000 80,000 $(125,000) Cost of goods sold and shipping expense are both variable: other costs are all fixed. The contribution margin is 60%, 61%, and 46%, respectively, for the West, Central, and East. Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the three regions given above. The three regions are about the same size, and each has its own manager and sales staff. The products that the company distributes vary widely in profitability. QUESTIONS. (Do not prepare statements-Discussion only): Review the statement and information above and based on the reading in the chapter on segmented data in Noreen, chapter 4, answer the following 1. List at least two disadvantages or weaknesses that you see in the statement format above. Include the regional and corporate expenses in your discussion 2. Explain the basis that is apparently being used to allocate the corporate expenses to the regions Specifically discuss advertising and general expenses. Do you agree with these allocations? Why or why not? Explain 3. Review the statement by region and assume that corporate expenses were not allocated to the sales regions. List at least four points, suggestions which, in your view, might help to improve the company's performance and profitability, and should be brought to management's attention? DFOS Problem & Questions Analysing a Segmented Income Statement.docx... Page 1 of 1...2/15/20 DFO3 (Problem and Questions) Analyzing a Segmented Income Statement PROBLEM (Based on textbook P4-26 MODIFIED) Losses have been incurred at Millard Corporation for some time. In an effort to isolate the problem and improve the company's performance, management has requested that the monthly income statement be segmented by sales region. The company's first effort at preparing a segmented statement is given below. Notice there is no total column. This statement is for May, the most recent month of activity. Sales Region Central $800,000 East $750,000 West Sales.... $450,000 Regional expenses (traceable): Cost of goods sold. 162,900 Advertising........ 108,000 Salaries... 90,000 Utilities. 13,500 Depreciation........... 27,000 Shipping expense.... 17,100 Total regional expenses..... 418,500 Regional income (loss) before corporate expenses................ 31,500 Corporate expenses: Advertising (general).......... 18,000 General administrative expense.............. 50,000 Total corporate expenses... 68,000 Net operating income (loss).............. $(36,500) 280,000 200,000 88,000 12,000 28,000 32,000 640,000 376,500 210,000 135,000 15,000 30,000 28,500 795,000 160,000 (45,000) 32,000 50,000 82,000 $ 78,000 30,000 50,000 80,000 $(125,000) Cost of goods sold and shipping expense are both variable: other costs are all fixed. The contribution margin is 60%, 61%, and 46%, respectively, for the West, Central, and East. Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the three regions given above. The three regions are about the same size, and each has its own manager and sales staff. The products that the company distributes vary widely in profitability. QUESTIONS. (Do not prepare statements-Discussion only): Review the statement and information above and based on the reading in the chapter on segmented data in Noreen, chapter 4, answer the following 1. List at least two disadvantages or weaknesses that you see in the statement format above. Include the regional and corporate expenses in your discussion 2. Explain the basis that is apparently being used to allocate the corporate expenses to the regions Specifically discuss advertising and general expenses. Do you agree with these allocations? Why or why not? Explain 3. Review the statement by region and assume that corporate expenses were not allocated to the sales regions. List at least four points, suggestions which, in your view, might help to improve the company's performance and profitability, and should be brought to management's attention? DFOS Problem & Questions Analysing a Segmented Income Statement.docx... Page 1 of 1...2/15/20