Creaston Limiteds most recent monthly contribution format income statement is given below CREASTON LIMITED Income Statement For the Month Ended May 31 Sales $900,000 100 0 Variable expenses 408,000 45 3 Contribution margin 492,000 54 7 Fixed expenses 465,000 51 7 Operating income $ 27,000 3 0 Management is disappointed with the companys performance and is wondering what can be done to improve profits By examining sales and cost records, you have determined the following The company is divided into two sales territoriesCentral and Eastern Central Territory recorded $400,000 in sales and $208,000 in variable expenses during May The remaining sales and variable expenses were recorded in Eastern Territory Fixed expenses of $160,000 and $130,000 are traceable to Central and Eastern Territories, respectively The rest of the fixed expenses are common to the two territories The company is the exclusive distributor for two productsKiks and Dows Sales of Kiks and Dows totalled $100,000 and $300,000, respectively, in Central Territory during May Variable expenses are 25 of the selling price for Kiks and 61 for Dows Cost records show that $60,000 of Central Territorys fixed expenses are traceable to Kiks and $54,000 to Dows, with the remainder common to the two products Required Prepare contribution format segmented income statements, first showing the total company broken down between sales territories and then showing Central Territory broken down by product line Show both Amount and Percentage columns for the company in total and for each segment Round percentage computations to one decimal place Look at the statement you have prepared showing the total company segmented by sales territory Which points revealed by this statement should be brought to managements attention Look at the statement you have prepared showing Central Territory segmented by product lines Which points revealed by this statement should be brought to managements attention Problem 11 16 (30 minutes) 1 Sales Territory Total Company Central Eastern Amount Amount Amount $900,000 100 0 $400,000 100 408,000 45 3 208,000 52 492,000 54 7 192,000 48 Sales Variable expenses Contribution margin Traceable fixed expenses Territorial segment margin Common fixed expenses Operating income $ 27,000 3 0 Central Territory Amount $400,000 100 0 208,000 52 0 192,000 48 0 Product Line Kiks Dows Amount Amount $100,000 100 $300,000 100 25,000 25 61 75,000 75 Sales Variable expenses Contribution margin Traceable fixed expenses Product line segment margin Common fixed expenses Sales territory segment margin

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Creaston Limiteds most recent monthly contribution format income statement is given below: CREASTON LIMITED Income Statement For the Month Ended May 31 Sales $900,000 100.0%

Creaston Limiteds most recent monthly contribution format income statement is given below:

CREASTON LIMITED Income Statement For the Month Ended May 31
Sales	$900,000	100.0%
Variable expenses	408,000	45.3
Contribution margin	492,000	54.7
Fixed expenses	465,000	51.7
Operating income	$ 27,000	3.0%

Management is disappointed with the companys performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following:
1. The company is divided into two sales territoriesCentral and Eastern. Central Territory recorded $400,000 in sales and $208,000 in variable expenses during May. The remaining sales and variable expenses were recorded in Eastern Territory. Fixed expenses of $160,000 and $130,000 are traceable to Central and Eastern Territories, respectively. The rest of the fixed expenses are common to the two territories.
2. The company is the exclusive distributor for two productsKiks and Dows. Sales of Kiks and Dows totalled $100,000 and $300,000, respectively, in Central Territory during May. Variable expenses are 25% of the selling price for Kiks and 61% for Dows. Cost records show that $60,000 of Central Territorys fixed expenses are traceable to Kiks and $54,000 to Dows, with the remainder common to the two products.

Required:

1. Prepare contribution format segmented income statements, first showing the total company broken down between sales territories and then showing Central Territory broken down by product line. Show both Amount and Percentage columns for the company in total and for each segment. Round percentage computations to one decimal place.
2. Look at the statement you have prepared showing the total company segmented by sales territory. Which points revealed by this statement should be brought to managements attention?
3. Look at the statement you have prepared showing Central Territory segmented by product lines. Which points revealed by this statement should be brought to managements attention?

Problem 11-16 (30 minutes) 1. % Sales Territory Total Company Central Eastern Amount % Amount % Amount $900,000 100.0 $400,000 100 408,000 45.3 208,000 52 492,000 54.7 192,000 48 Sales. Variable expenses. Contribution margin. Traceable fixed expenses. Territorial segment margin Common fixed expenses* Operating income $ 27,000 3.0 Central Territory Amount % $400,000 100.0 208,000 52.0 192,000 48.0 Product Line Kiks Dows Amount % Amount % $100,000 100 $300,000 100 25,000 25 61 75,000 75 Sales...... Variable expenses. Contribution margin Traceable fixed expenses.... Product line segment margin Common fixed expenses*.... Sales territory segment margin