Losses have been incurred at Abacus Corporation for some time. In an effort to isolate the problem and improve the company's performance , management has requested that the monthly income statement be segmented by sales region. The company's first effort at preparing a segmented income statement is given below. This statement is for January, the most recent month of activity:

Sales Region .

West Central East

Sales P450,000 P800,000 P750,000

Regional expenses (traceable);

Cost of goods sold 162,900 280,000 376,500

Advertising 108,000 200,000 210,000

Salaries 90,000 88,000 135,000

Utilities 13,500 12,000 15,000

Depreciation 27,000 28,000 30,000

Shipping expense 17,100 32,000 28,500

Total regional expenses 418,500 640,000 795,000

Regional income (loss) before

corporate expenses 31,500 160,000 (45,000)

Corporate expenses:

Advertising (general) 18,000 32,000 30,000

General administrative

Expense 50,000 50,000 50,000

Total corporate expenses 68,000 82,000 80,000

Net operating income (loss) P(36,500) P78,000 P(125,000)

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Cost of goods sold and shipping expense are both variable; other costs are all fixed. Abacus Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the three regions given above. The three regions are about the same size, and each has its own manager and sales staff. The products that the company distributes vary widely in profitability.

Required:

1. List any disadvantages or weaknesses that you see to the statement format illustrated above.
2. Explain the basis that is apparently being used to allocate the corporate expenses to the regions. Do you agree with these allocations. Explain.
3. a new contribution format segmented income statement for January. Show a Total column as well as data for each region. In addition, for the company as a whole and for each sales region, show each item on the segmented income statement as a percent of sales.
4. Analyze the statement that you prepared in part (3) above. What points that might help improve the company's performance would you bring to management's attention?