CASE 6-30 Service Organization; Segment Reporting LO6-4 Music Teachers, Inc., is an educational association for music teachers that has 20.000 members. The association operates from a central headquarters but has local membership chapters throughout the United States. Monthly meetings are held by the local chapters to discuss recent developments on topics of interest to music teachers. The association's magazine, Teachers' Forum, is issued monthly with features about recent developments in the field. The association publishes books and reports and also sponsors professional courses that qualify for continuing professional education credit. The association's statement of revenues and expenses for the current year is presented below. The board of directors of Music Teachers, Inc, has requested that a segmented income statement be prepared showing the contribution ol each segment to the association. The association has four segments: Membership Division. Magazine Subseriptions Division, Books and Reports Division, and Continuing Education Division. Mike Doyle has been assigned responsibility for preparing the segmented income satement, and he has gathered the following data: a. The 20,000 members of the association pay dues of $100 per year, of which $20 covers a one-year sabscription to the Teachers Fonum. Other benefits include membership in the association and chapter affiliation. The portion of the dues corering the magazine subscription (\$20) stould be assigned to the Magazine Subseriptions Division b. A toal of 2,500 oneyear subseriptions to Teachers Forum were also sold last year to nonmembers and libraries at $30 per subseription. In addition to subseriptions, the journal generated $100.000 in advertising revenues. e. The costs to prodace the Teadien' Forum magazine included $7 per subscription for printing and paper and $4 per subseription for postage and shipping. d. A total of 28.000 technical reports and professional texts were sold by the Books and Reports Division at an average selling price per unit of $25. Average conts per publication were $4 for priatiog and paper abd $2 for postage and shipping. e. The aswociation offers a varicty of continuing edocation courses to both members and Aotmembers. The oneday courses had a tuition cost of $75 exch and were attensed by 2,400 atudents. A totat of 1.760 students took thoday courses at a cuition cost of $125 for each sudeet. Outside instrictors were poid to teach some counes. f. Salary costs and space occupied by divison follow Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $280,000 in occupancy costs (which can be allocated to segments based on their squate feet occupied) includes $50,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes. g. Printing and paper costs other than for magazine subscriptions and foe books and reports relate to the Continuing Education Division. h. General and administrative expenses include costs relating to overall administration of the association as a whole. The company's cotporate staff does some mailing of materials for general administrative purposes The expenses that can be traced or assigned to the corporate staff, as well as any other expenses that are not traceable to the segments, will be treated as common costs. It is not necessary to distinguish between variable and fixed costs. Required: 1. Prepare a segmented income statement for Music Teachers. Ine. This statement should show the segment margin for each division as well as results for the association as a whole. 2. Give arguments for and against allocating all costs of the association to the four divisions