North American Industries is a diversified company whose products are marketed both domestically and internationally. The company's major product lines are furniture, sports equipment, and household appliances. At a recent meeting of the board of directors, there was a lengthy discussion on ways to improve overall corporate profitability. The members of the board decided that they required additional financial information about individual corporate operations in order to target areas for improvement.

Danielle Murphy, the controller, has been asked to provide additional data that would assist the board in its investigation. Murphy believes that income statements, prepared along both product lines and geographic areas, would provide the directors with the required insight into corporate operations. Murphy had several discussions with the division managers for each product line and compiled the following information from these meetings.

		Product Lines
	Furniture	Sports	Housewares	Total
Production and sales in units	170,000	190,000	170,000	530,000
Average selling price per unit	$8.00	$19.00	$16.00
Average variable production cost per unit	4.00	9.60	8.24
Average variable selling expense per unit	2.00	2.20	2.35
Fixed production overhead, exluding depreiciation				$500,000
Depreciation of plant and equipment				$400,000
Administrative and selling expense				$1,180,000

1.

The division managers concluded that Murphy should allocate fixed production overhead to both product lines and geographic areas on the basis of the ratio of the variable costs expended to total variable costs.

2.

Each of the division managers agreed that a reasonable basis for the allocation of depreciation on plant and equipment would be the ratio of units produced per product line (or per geographical area) to the total number of units produced.

3.

There was little agreement on the allocation of administrative and selling expenses, so Murphy decided to allocate only those expenses that were traceable directly to a segment. For example, manufacturing staff salaries would be allocated to product lines, and sales staff salaries would be allocated to geographic areas. Murphy used the following data for this allocation.

Production Staff	Sales Staff
Furniture $126,000	United States $66,000
Sports 146,000	Canada 106,000
Housewares 86,000	Mexico 256,000

4. The division managers were able to provide reliable sales percentages for their product lines by geographical area.

	Percentage of Unit Sales
	United States	Canada	Mexico
Furniture	30%	10%	60%
Sports	30%	30%	40%
Housewares	20%	20%	60%

Murphy prepared the following product-line income statement based on the data presented above.

NORTH AMERICAN INDUSTRIES

Segmented Income Statement by Product Lines

For Fiscal Year Ended April 30, 20x0

	Product Lines
	Furniture	Sports	Housewares	Unallocated	Total
Sales in Units	170,000	190,000	170,000
Sales	$1.360.000	$3,610,000	$2,720,000		$7,690,000
Variable production & selling costs	1,020,000	2,242,000	1,800,300		5,062,300
Contribution Margin	340,000	1,368,000	919,700		2,627,700
FIXED COSTS:
Fixed production overhead	$110,000	$227,000	$172,000		$509,000
Depreciation	130,000	143,000	135,000		408,000
Administrative & selling expenses	126,000	146,000	86,000	826,000	1,180,000
TOTAL Fixed costs	$366,000	$515,000	$390,000	$826,000	$2,097,000
Operating Income	$(26,000)	$853,000	$529,700	$(826,000)

1. Prepare a segmented income statement for North American Industries based on the company's geographical areas. (Round intermediate calculations to 6 decimal places and final answers to the nearest dollar amount).