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.

Music Teachers, Inc.

Statement of Revenues and Expenses For the Year Ended November $30$

Revenues from clients

$$3,275,000$

Expenses:

Salaries

The board of directors of Music Teachers, Inc., has requested that a segmented income statement be prepared showing the contribution of

each segment to the association. The association has four segments: Membership Division, Magazine Subscriptions Division, Books and

Reports Division, and Continuing Education Division. Mike Doyle has been assigned responsibility for preparing the segmented income

statement, 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 subscription to the Teachers' Forum.

Other benefits include membership in the association and chapter affiliation. The portion of the dues covering the magazine subscription

$($$$20)$ should be assigned to the Magazine Subscriptions Division.

Page $217$

b$.$ A total of $2,500$ one$-$year subscriptions to Teachers' Forum were also sold last year to nonmembers and libraries at $$30$ per subscription.

In addition to subscriptions, the journal generated $$100,000$ in advertising revenues.

c$.$ The costs to produce the Teachers' Forum magazine included $$7$ per subscription for printing and paper and $$4$ per subscription 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 $$25.$ Average costs per publication were $$4$ for printing and paper and $$2$ for postage and shipping.

e$.$ The association offers a variety of continuing education courses to both members and nonmembers. The one$-$day courses had a tuition

cost of $$75$ each and were attended by $2,400$ students. A total of $1,760$ students took two$-$day courses at a tuition cost of $$125$ for each

student. Outside instructors were paid to teach some courses.

f$.$ Salary costs and space occupied by division 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 square 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 for books and reports relate to the Continuing Education Division.

h$.$ General and administrative expenses include costs relating to the overall administration of the association as a whole. The company's

corporate 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:

Prepare a segmented income statement for Music Teachers, Inc. This statement should show the segment margin for each division as

well as results for the association as a whole.

Give arguments for and against allocating all costs of the association to the four divisions.