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 Sports Appliances 198,000 137,500 $ 20.00 $ 23.00 10.00 16.50 2.50 2.50 Furniture 137,500 $ 10.00 5.00 3.00 Total 473,000 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, excluding depreciation Depreciation of plant and equipment Administrative and selling expense $ 550,000 378,400 1,150,000 1. The division managers concluded that Murphy should allocate fixed manufacturing 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. Manufacturing Staff Furniture $125,000 Sports 145,000 Appliances 85,000 Sales Staff United States $ 65,000 Canada 105,000 Asia 255,000 4. The division managers were able to provide reliable sales percentages for their product lines by geographical area. Furniture Sports Appliances Percentage of Unit Sales United States Canada Asia 40% 10% 50% 40% 40% 20% 10% 80% 10% Murphy prepared the following product-line income statement based on the data presented above. Unallocated Total PACIFIC RIM INDUSTRIES Segmented Income Statement by Product Lines For the Fiscal Year Ended April 30, 20x0 Product Lines Furniture Sports Sales in units 137,500 198,000 Sales $1,375,000 $3,960,000 Variable manufacturing and selling costs 1,100,000 2,475,000 Contribution margin $ 275,000 $1,485,000 Fixed costs: Fixed manufacturing overhead $ 97,778 $ 220,000 Depreciation 110,000 158,400 Administrative and selling expenses 125,000 145,000 Total fixed costs $ 332,778 $ 523,400 Operating income (loss) $ (57,778) $ 961,600 Appliances 137,500 $3,162,500 2,612,500 $ 550,000 $8,497,500 6,187,500 $2,310,000 $ $ 232,222 110,000 85,000 $ 427, 222 $ 122,778 795,000 $ 795,000 $(795,000) $ 550,000 378,400 1,150,000 $2,078,400 $ 231,600 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 unit sales Revenue 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)