Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Income Statements Segmented by Territory Script, Inc., has two product lines. The September income statements of each product line and the company are as follows:

Income Statements Segmented by Territory

Script, Inc., has two product lines. The September income statements of each product line and the company are as follows:

SCRIPT, INC. Product Line and Company Income Statements For Month of September

Pens Pencils Total
Sales $25,000 $30,000 $55,000
Less variable expenses (10,000) (12,000) (22,000)
Contribution margin 15,000 18,000 33,000
Less direct fixed expenses (7,000) (6,000 (13,000)
Product margin $8,000 $12,000 $20,000
Less common fixed expenses
(6,000)
Net income $14,000

Pens and pencils are sold in two territories, Florida and Alabama, as follows:

Florida Alabama
Pen sales $18,000 $7,000
Pencil sales 6,000 24,000
Total sales $24,000 $31,000

The preceding common fixed expenses are traceable to each territory as follows:

Florida fixed expenses $2,000

Alabama fixed expenses 3,000

Home office administration fixed expenses 1,000

Total common fixed expenses $6,000

The direct fixed expenses of pens, $7,000, and of pencils, $6,000, cannot be identified with either territory. The company's accountants were unable to allocate any of the common fixed expenses to the various segments.

Prepare income statements segmented by territory for September, including a column for the entire firm. Do not use negative signs with your answers.

Script, Inc. Territory and Company Income Statements For the Month of September

Florid Alabama Compant totals
Sales
Pens
Pencils
Total sales
Variable costs
Pens
Pencils
Total
Contribution margin
Direct fixed expenses
Territory margin

Common fixed expenses:

Pens ...... Answer
Pencils ...... Answer
Home office ...... Answer
Total ....... Answer
Net income .......

b) Why are the direct expenses of one type of segment report not necessarily the direct expenses of another type of segment report?

Because direct expenses are all variable costs.
Because only fixed expenses are direct costs.
Because costs that may be directly traceable to one segment base (i.e., territory) may not be directly traceable to another segment base (i.e., product).
Because management must decide which costs are direct and which are indirect.
None of the above.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Information System

Authors: James A. Hall

7th Edition

978-1439078570, 1439078572

More Books

Students also viewed these Accounting questions