. (9 3- ACC1ZOO 901 Fall 2022 Manav: X 9 Question 6 - TEST CH 5,6 - C X H Course Hero X i u Course Here x i + V 6 C i ezto,mheducation,com/ext/map/index.html?_con=con&external_browser:0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.com%252F#/activity/q... Q) i} a I] . E M Gmail L My Drive~Goog|e... a YouTube 9 Maps - ICanvas 3 Other Bookmarks TEST CH 5,5 0 Saved Help Save 8. Exit Submit 16.66 Toxaway Company is a merchandiser that segments its business into two divisionsCommercial and Residential. The company's poms accounting intern was asked to prepare segmented income statements that the company's divisional managers could use to calculate their break-even points and make decisions. She took the prior month's companywide income statement and prepared the absorption format segmented income statement shown below: Problem 6-24 (Algo) Companywide and Segment Break-Even Analysis; Decision Making [LOG-4, LOG-5] eEook Total Hint Company Commercial Residential $ References Sales 1,020,000 S 340,000 $ 680,000 Cost of goods sold 669,800 180,200 459,600 Gross margin 350,200 159,300 190,400 Selling and administrative expenses 312,000 140,000 172,000 Net operating income $ 38,200 5 19,800 $ 18,400 In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $60,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $86,000 of xed expenses that would disappear if the Commercial segment is dropped, and $64,000 of fixed expenses that would disappear if the Residential segment is dropped Required: 1 Do you agree with the interns decision to use an absorption format for her segmented income statement? 2 Based on a review of the intern's segmented income statement. a. How much of the company's common xed expenses did she allocate to the Commercial and Residential segments? b. Which of the following three allocation bases did she most likely used to allocate common fixed expenses to the Commercial and Residential segments: (a) sales, (b) cost of goods sold, or (c) gross margin? 3. Do you agree with the interns decision to allocate the common xed expenses to the Commercial and Residential segments? 4. Redo the intern's segmented income statement usino the contribution format. o Mc Grav Hill