Pacific Rim 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 Pacific Rim's 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 SportsAppliances Total 460,100 Production and sales in units Average selling price per unit Average variable manufacturing cost per unit Average variable selling expense per unit Fixed manufacturing overhead 133,750 $ 10.00 5.00 3.00 192,600 133,750 20.00 21.00 15.60 1.60 10.20 2.30 excluding depreciation Depreciation of plant and equipment Administrative and selling expense $ 501,000 368,080 1,170,000 1. The division managers concluded that Murphy should allocate fixed manufacturing overhead to both product lines and geographic 2. Each of the division managers agreed that a reasonable basis for the allocation of depreciation on plant and equipment would be 3. There was little agreement on the allocation of administrative and selling expenses, so Murphy decided to allocate only those areas on the basis of the ratio of the variable costs expended to total variable costs the ratio of units produced per product line (or per geographical area) to the total number of units produced 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. Manufacturing Staff Furniture Sports Appliances Sales Staff $122,000 United States 142,000 Canada 82,000 Asia 62,000 102,000 252,000 4. The division managers were able to provide reliable sales percentages for their product lines by geographical area Percentage of Unit Sales Furniture Sports Appliances United States 40% 40% 30% Canada 20% 40% 30% Asia 40% 20% 40% Murphy prepared the following product-line income statement based on the data presented above PACIFIC RIM INDUSTRIES Segmented Income Statement by Product Lines For the Fiscal Year Ended April 30, 20x0 Product Lines Sports Appliances 133,750 $1,337,500 $3,852,000 $2,808,750 2.407,500 2,300,500 267,500 $1,444,500 508 250 Furniture 133,750 Unallocated Total Sales in units Sales Variable manufacturing and selling costs Contribution margin Fixed costs: 192,600 $7,998,250 5.778.000 $2,220,250 Fixed manufacturing overhead Depreciation $ 92,778 208,750 199,472 107,000 82,000 501,000 368,080 107,000 122,000 154,080 142,000 Administrative and selling expenses 824,000 1,170,000 321.778 S 504.830 388.472 $2,039,080 $824,000 $(824,000) 181,170 Total fixed costs Operating income (loss) $ (54,278) 939,670 119,778 Required: 1. Prepare a segmented income statement for Pacific Rim Industries based on the company's geographical areas. The statement should show the operating income for each segment. (Do not round your intermediate calculations and round your final answers to the nearest dollar amount.) PACIFIC RIM INDUSTRIES Segmented Income Statement by Geographic Areas For the Fiscal Year Ended April 30, 20x0 Geographic Areas United States Canada Asia Unallocated Total Sales in units Furniture Sports Appliances Total revenue Variable costs Furniture Sports Appliances Total variable costs Contribution margin Fixed costs Manufacturing overhead Depreciation Administrative and selling expenses Total fixed costs Operating income (loss)