Question
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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