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23.33 Segment Reporting P11-33 Minnesota Break Company bakes three products: donuts, bread and pastries. It sells them in cities of Minneapolis and St. Paul. For

23.33 Segment Reporting P11-33

Minnesota Break Company bakes three products: donuts, bread and pastries. It sells them in cities of Minneapolis and St. Paul. For March, its first month of operation, the following income statement was prepared:

Minnesota Bread Company Territory and Company Income Statements For the Month of March

Minneapolis

St paul

Total

Sales

$2100

$500

$2600

Cost of goods sold

(1500)

(300)

(1800)

Gross profit

600

200

800

Selling and admin expenses

(400)

(225)

(625)

Net income

$200

$(25)

$175

Sales and selected variable expense data are as follows:

Donuts

Bread

Pasteries

Fixed baking expenses

$200

$140

$100

Variable baking expenses as a % of sales

50%

50%

60%

Variable selling expenses as a % of sales

4%

4%

6%

City of Minneapolis sales

$850

$900

$350

City of st paul sales

$200

$150

$150

The fixed selling expenses were $385 for March, of which $160 was a direct expense of the Minneapolis market and $225 was a direct expense of the St. Paul market. Fixed administration expenses were $130, 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 Minnesota Bread. Explain.

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