2. 5 7 3 Problem 1 - Segment Income Statements Student Painters Inc. has two different product lines: interior and exterior. The revenue and expense 4 data for the year follows: Interior Exterior Total 6 Net Sales $383,900 $537,900 $921,800 Direct expenses (all direct expenses are variable except for the admin expense, which is fixed): 8 Cost of goods sold 211,145 215,160 426,305 9 Selling expenses 33,800 59,650 93,450 10 Administrative expenses 10,950 26,300 37,250 11 Bad Debts Expenses 3,760 6,530 10,290 12 Indirect expenses (all are fixed): 13 Selling expenses 146,000 14 Administrative expenses 162,000 00 15 16 Required: a. Prepare a Segmented Income Statement showing the contribution margin, contribution to indirect expenses for each product line, and net income for the company as a whole. Do not allocate indirect 17 expenses to the product lines or segments. b. Prepare a statement (starting with Contribution to Indirect expenses from part a) showing the 18 allocation of indirect expenses and net income of each segment. Indirect selling expenses are allocated on the basis of net sales and indirect administrative expenses are allocated 19 on the basis of the direct administrative expenses. Round your answers to the nearest dollar (no decimals). c. Based on the information calculated in parts a and b, should Student Painters drop either of the two 20 segments. Why or why not? 21 20 Total 21 22 Part a: 23 Student Painters, Inc. 24 Segment Income Statements 25 Interior Exterior 26 Net Sales 27 Variable Costs: 28 29 30 31 32 33 Contribution to Indirect Costs 34 Interior and exterior Self check: 35 + 36 37 Net Income A from above 0 Part b: 1 Contribution to Indirect Costs 2 Indirect costs: 3 Selling expense 14 Hint? YES (Seg Sales/Total Sales) $146,000 indirect selling expense Admin. Expense 5 16 17 Hint? YES (Seg Direct admin / Total Direct admin) x 5162,000 indirect admin expense 118 Self check: 19 50 Part c: 51