please answer the following below, thank you!

1 Question 2-Segmented Income Statement & Product line Analysis (41 marks) Mountain Sports carries a limited line of products and services that can be divided into four departments (segments) 1. Cross-country ski packages (skis, boots, and poles), 2. Mountain bikes 3. Accessories 4. Parts and service 3 The owners of the company have been pleased with the operating income to date as shown in the company's overall income statement in Question 1 However, they want to get a better idea of how each of its four departments are doing. The Junior accountant, Kelly, thought a segmented income statement would provide the information the owners are looking for, however, Kelly has never prepared a segmented income statement. While Kelly tried to create the segmented statement, she has asked you to review it and make changes as necessary. Additional notes have been provided to the income statement so that you may assess if the junior accountant's statement is correct. Ultimately, it is up to you to provide a corrected segmented income statement and provide recommendations to the owners. A note from the junior accountant, Kelly: Hi again! I have to admit, I don't have much experience with segmented income statements. Our manager, Sarah, was trying to tell me about common and traceable fixed costs. I didn't understand it, so just ignored it (keep that between us!). I gave it my best shot but I'm really hoping you'll be able to help me. Here's some of the information and assumptions I used when creating this segmented income statement: 1. The sales and cost of goods sold information was taken directly from each department. My manager checked this over and it was correct! You can use this information when you re-state the segmented income statement below. Oh, the parts & service expense is also correct! 2.1 just allocated a lot of the expenses equally to the product lines, I wasn't exactly sure what to do. You can see which ones I allocated equally below which include: depreciation, property taxes, rent and utilities. There's some notes to the segmented income statement below which I think should help you determine how to properly do it...or maybe I did do it properly (hmmm, I'm not sure)? My manager said all of these expenses will stay the same even if any one of the product lines were eliminated. In other words, the company would continue to incur all these costs regardless of which product lines are offered. 3. There's a lot of information in the notes regarding salaries and commissions. The parts and service department is treated a bit differently because those employees don't receive commissions. So just figured out the total salaries and commissions for the other employees and split it equally between cross country skis, mountain bikes and accessories. However, my manager said that these employees will continue to work at the company no matter what (they sell all the products in the store). Does that matter? 4. There was some advertising that was spent specifically on each department and then some that was for the company as a whole. I just kind of guessed how to put this into the statement. Maybe this has something to do with the common vs. traceable expense thing? This is so hard! Help! 00 Dropdowns + 10 11 Sales 12 Cost of goods sold% 13 Cost of goods sold 14 Gross Profit 15 Operating expenses 16 Advertising 17 Depreciation 18 Property taxes 19 Rent 20 Parts & service expense 21 Salaries & commissions 22 Utilities 23 Total Operating Expenses 24 Operating income (loss) 25 Interest expense 26 Income (Loss) before taxes 27 Income tax 28 Net Income (Loss) D Mountain Sports Ltd. Segmented Income Statement For the Year Ended Dec 31, 2019 Cross Country Ski Packages Mountain Bikes 623,047 734,066 44% 47% 276.633 341,414 346,414 392,652 38,543 47,352 5,570 5,570 8,620 8,620 28,372 28,372 35,625 41,973 106,639 106,639 25,824 25.824 249,193 264,350 97,221 128.302 1,750 1,750 95,471 126,552 17431 20,537 $78,040 $106,015 Notes 1 2 3 4 5 6 7 8 26.00% Accessories 287,590 25% 72,789 214,801 10,097 5,570 8,620 28,372 16,444 106,639 25.824 201.566 13,235 1,750 11,485 8,046 $3,439 Parts & Service 138,215 19% 26,731 111,484 8,008 5,570 8.620 28.372 0 75,000 25,824 151,393 -39,909 1,750 41,659 3,867 $45,526 G TOTAL 1,782,918 717,567 1,065,351 104,000 22,280 34,478 113,488 94,042 394,917 103.297 866,502 198,849 7,000 191,849 49,881 $141,969 This is my first attempt at the segmented income statement. I think it's safe to say that I need help! 29 30 Notes to the financial statements: 1. Advertising is committed to at the beginning of the period by management. Management has many different forms of advertising campaigns with different focuses as follows: 31 Cross country ski packages Accessories Parts & Service TOTAL Mountain Bikes Promotes company as a whole 32 33 $ 34,000 $ 42,000 $ 8,000 $ 7,000 $ 13,000 $ 104,000 34 35 2. The company uses the straight-line method of depreciation. 36 37 3. The property taxes are set by the City and do not change with changes in sales volume. 38 39 4. Rent has two components: 40 Monthly amount 5,000 Percentage based on each department's 41 sales 3% 42 43 5. Parts and services expense varies with sales of cross country skis, mountain bikes, and accessories. There are no parts & service expense for the parts & service department. 44 45 6. Sales commissions are paid on sales for cross country skis, mountain bikes, and accessories. The Parts & Service department employees do not earn sales commissions on their sales. 46 47 Sales commissions 11% Total yearly salary of employees that sell skis, bikes, and accessories. These employees will continue to work for the company regardless of which product lines are offered. 48 S 61,000 The store managers are paid a total yearly salary. They are responsible for all of the departments. These managers will continue to work even if any of the divisions are closed. 49 $ 78,000 The Parts & Service Employees only work in that department. If this department were closed, the technicians would be laid off. The total salary for the technicians is 50 S 75.000 The Store Managers are paid a total yearly salary. They are responsible for all of the departments. These managers will continue to work even if any of the divisions are closed $ 78.000 The Parts & Service Employees only work in that department. If this department were closed, the technicians would be laid off. The total salary for the technicians is $ 75,000 51 52/7. Unities are the same regardless of activity and will not change even if a productie is dropped 53 Interest expense is charged on the outstanding bank loans. The total interest expensei 5 7,000 56 Income taxes are calculated for the company as a whole. The company will have to pay taxes regardless of which product lines it offers. 57 Required: Part A: (25 marks) 1) Restate the segmented income statement using the statement the junior accountant prepared and the notes to the financial statements (Chapter 7 Appendix) Check figures have been provided to ensure you are on the right track. If you are not arriving at the check figures, please discuss with your group members to determine where you went wrong! See the word document provided to your group containing the check figures! Notes The percentage column should be taken as a percentage of sales for example, cost of goods sold % for mountain bikes should be taken as a % of mountain bike sad There may be small rounding differences where total amoun calculator and input the final answer. 51, that is ok! Make sure you are using full Excel functionality and entering formulas into each cell You cannot use your Mountain Sports Segmented income Statement By Product Line For the Year Ended December 31, 2019 TOTAL Cross Country Sk Packages Mountain Bes Percent Parts and Service Department Amount Percent Anovel Percent Amount 05 OF 05 FOODSEN Ca 03 as 04 Accessories Percent Amount Dropdowns + Amount Percent Note from Kelly, Junior accountant The sales and cost of goods sold information correct so I slotted it in the owners confirm that these were correct). As for the rest. up to you The store managers are paid a total yearly salary. They are responsible for all of the departments. These managers will continue to work even if any of the divisions are closed. $ 78,000 The Parts & Service Employees only work in that department. If this department were closed, the technicians would be laid off. The total salary for the technicians is $ 75,000 7. Utilities are the same regardless of activity and will not change even if a product line is dropped 8. Interest expense is charged on the outstanding bank loans. The total interest expense is 7,000 9. Income taxes are calculated for the company as a whole. The company will have to pay taxes regardless of which product lines it offers Required: Part A: (25 marks) 1) Restate the segmented income statement using the statement the junior accountant prepared and the notes to the financial statements (Chapter 7 Appendix) Check figures have been provided to ensure you are on the right track. If you are not arriving at the check figures, please discuss with your group members to determine where you went wrong! See the word document provided to your group containing the check figures! Notes: The percentage column should be taken as a percentage of sales (for example, cost of goods sold % for mountain bikes should be taken as a % of mountain bike sales) There may be small rounding differences where total amounts are off by $1, that is ok! Make sure you are using full Excel functionality and entering formulas into each cell. You cannot use your calculator and input the final answer. Mountain Sports Ltd. Segmented Income Statement-By Product Line Cross Country Ski Packages Amount Percent SS SALES 621,047 Les Variable Costs (MUST BE LISTED ALPHABETICALLY 67 Cost of Goods Sold 276,633 L 59 30 71 TOTAL 72 73 less Tracnable Fived Costs (MUST BE USTED ALPHABETICALLY 74 75 76 TOTAL Traceable Fixed Costs 77 36 les Comman Fived Costs (MUST BE LISTED ALPHABETICALLY) 79 01 Case Ind 03 02 100% 44.4% D Mountain Sports Und Segmented income Statement By Product ne for the Year Ended December 31, 2019 Mountain Bikes Amount Percent 734,066 341414 Of 05 Accessories Amount Prant 100.0% 287,590 46.5% 72,759 OF Dropdown 100.0% 25.3% Parts and Service Department Amount Percent 100.0 138,215 26,781 1936 TOTAL Amount 1781918 217.547 Percent 200 40.2 corred to sotted it in the users contened that these were corect). As for the rest.Pat's up to you Nots from Instructor Any figures provided in the statement are check figures. If you do not arrive at these numbers please revisit and discuss with your group membe It's your group's responsibility to ensure that the check figures match the original chech provided TAN 76 TOTAL Tracmable Five Co 78 Les Common Fisad Cods (MUST BE LISTED ALPHABETICALLY 79 #D NE 82 90 ME 52 Part 25 Analysis (1 mark 2. Which produd ne does the best job of turning sales into pra 93 hent: see "sto" questions in chapter 7 workbook) 34 95 01 as 03 Cave do 34 AT " # GE 225 86 + A B C 91 E F 92 Part 2b: Analysis (16 marks) 2. Which product line does the best job of turning sales into profits? 93 (hint: see "SEG" questions in chapter 7 workbook) 94 95 3. Management has been trying to decide if any departments should be closed. Based on the segmented income statement you prepared, what are your recommendations to management? Which (if any) department should be 96 closed? 97 4. Management had been considering closing the Parts & Service Department based on the segmented income statement that the junior accountant prepared. If this: gment were closed, management estimates that sales for both Cross Country Skis and Mountain Bikes will decrease (see percentage below). Calculate the overall decrease in income to the company as a whole if the parts & service department is closed. 98 Decrease in cross country skis and 8% 99 mountain bikes. 100 101 Show all amounts as positive numbers: 102 Contribution Margin Lost: Parts & Service Department 103 Cross Country Skis 104 Mountain Bikes 105 Total CM Lost 106 Fixed Costs Avoided 107 Increase (decrease) in income 108 109 5. Based on both quantitative and qualitative analysis, should the Parts & Service Department be closed? Explain to management in a way that they can understand. Be sure to use your answer from the previous part in your response. Do not give textbook answers, use question datal (2 marks) 110 D G A6 X fx A note from the junior accountant, Kelly: A B C D E G H Fixed Costs Avoided 107 Increase (decrease) in income 108 109) 5. Based on both quantitative and qualitative analysis, should the Parts & Service Department be closed? Explain to management in a way that they can understand. Be sure to use your answer from the previous part in your response. Do not give textbook answers, use question data! (2 marks) 110 111 112 113 6.Please write a brief memo to the junior accountant explaining the changes you made to the segmented income statement. Textbook definitions will not be awarded marks. Please use question data and your own words. Even though the junior accountant. has some accounting background, the owners do not. As such, please ensure you write explanations in a way that both the junior accountant and the owners can understand. (5 marks) 114 115 116 117 118 119 120 121 1 Question 2-Segmented Income Statement & Product line Analysis (41 marks) Mountain Sports carries a limited line of products and services that can be divided into four departments (segments) 1. Cross-country ski packages (skis, boots, and poles), 2. Mountain bikes 3. Accessories 4. Parts and service 3 The owners of the company have been pleased with the operating income to date as shown in the company's overall income statement in Question 1 However, they want to get a better idea of how each of its four departments are doing. The Junior accountant, Kelly, thought a segmented income statement would provide the information the owners are looking for, however, Kelly has never prepared a segmented income statement. While Kelly tried to create the segmented statement, she has asked you to review it and make changes as necessary. Additional notes have been provided to the income statement so that you may assess if the junior accountant's statement is correct. Ultimately, it is up to you to provide a corrected segmented income statement and provide recommendations to the owners. A note from the junior accountant, Kelly: Hi again! I have to admit, I don't have much experience with segmented income statements. Our manager, Sarah, was trying to tell me about common and traceable fixed costs. I didn't understand it, so just ignored it (keep that between us!). I gave it my best shot but I'm really hoping you'll be able to help me. Here's some of the information and assumptions I used when creating this segmented income statement: 1. The sales and cost of goods sold information was taken directly from each department. My manager checked this over and it was correct! You can use this information when you re-state the segmented income statement below. Oh, the parts & service expense is also correct! 2.1 just allocated a lot of the expenses equally to the product lines, I wasn't exactly sure what to do. You can see which ones I allocated equally below which include: depreciation, property taxes, rent and utilities. There's some notes to the segmented income statement below which I think should help you determine how to properly do it...or maybe I did do it properly (hmmm, I'm not sure)? My manager said all of these expenses will stay the same even if any one of the product lines were eliminated. In other words, the company would continue to incur all these costs regardless of which product lines are offered. 3. There's a lot of information in the notes regarding salaries and commissions. The parts and service department is treated a bit differently because those employees don't receive commissions. So just figured out the total salaries and commissions for the other employees and split it equally between cross country skis, mountain bikes and accessories. However, my manager said that these employees will continue to work at the company no matter what (they sell all the products in the store). Does that matter? 4. There was some advertising that was spent specifically on each department and then some that was for the company as a whole. I just kind of guessed how to put this into the statement. Maybe this has something to do with the common vs. traceable expense thing? This is so hard! Help! 00 Dropdowns + 10 11 Sales 12 Cost of goods sold% 13 Cost of goods sold 14 Gross Profit 15 Operating expenses 16 Advertising 17 Depreciation 18 Property taxes 19 Rent 20 Parts & service expense 21 Salaries & commissions 22 Utilities 23 Total Operating Expenses 24 Operating income (loss) 25 Interest expense 26 Income (Loss) before taxes 27 Income tax 28 Net Income (Loss) D Mountain Sports Ltd. Segmented Income Statement For the Year Ended Dec 31, 2019 Cross Country Ski Packages Mountain Bikes 623,047 734,066 44% 47% 276.633 341,414 346,414 392,652 38,543 47,352 5,570 5,570 8,620 8,620 28,372 28,372 35,625 41,973 106,639 106,639 25,824 25.824 249,193 264,350 97,221 128.302 1,750 1,750 95,471 126,552 17431 20,537 $78,040 $106,015 Notes 1 2 3 4 5 6 7 8 26.00% Accessories 287,590 25% 72,789 214,801 10,097 5,570 8,620 28,372 16,444 106,639 25.824 201.566 13,235 1,750 11,485 8,046 $3,439 Parts & Service 138,215 19% 26,731 111,484 8,008 5,570 8.620 28.372 0 75,000 25,824 151,393 -39,909 1,750 41,659 3,867 $45,526 G TOTAL 1,782,918 717,567 1,065,351 104,000 22,280 34,478 113,488 94,042 394,917 103.297 866,502 198,849 7,000 191,849 49,881 $141,969 This is my first attempt at the segmented income statement. I think it's safe to say that I need help! 29 30 Notes to the financial statements: 1. Advertising is committed to at the beginning of the period by management. Management has many different forms of advertising campaigns with different focuses as follows: 31 Cross country ski packages Accessories Parts & Service TOTAL Mountain Bikes Promotes company as a whole 32 33 $ 34,000 $ 42,000 $ 8,000 $ 7,000 $ 13,000 $ 104,000 34 35 2. The company uses the straight-line method of depreciation. 36 37 3. The property taxes are set by the City and do not change with changes in sales volume. 38 39 4. Rent has two components: 40 Monthly amount 5,000 Percentage based on each department's 41 sales 3% 42 43 5. Parts and services expense varies with sales of cross country skis, mountain bikes, and accessories. There are no parts & service expense for the parts & service department. 44 45 6. Sales commissions are paid on sales for cross country skis, mountain bikes, and accessories. The Parts & Service department employees do not earn sales commissions on their sales. 46 47 Sales commissions 11% Total yearly salary of employees that sell skis, bikes, and accessories. These employees will continue to work for the company regardless of which product lines are offered. 48 S 61,000 The store managers are paid a total yearly salary. They are responsible for all of the departments. These managers will continue to work even if any of the divisions are closed. 49 $ 78,000 The Parts & Service Employees only work in that department. If this department were closed, the technicians would be laid off. The total salary for the technicians is 50 S 75.000 The Store Managers are paid a total yearly salary. They are responsible for all of the departments. These managers will continue to work even if any of the divisions are closed $ 78.000 The Parts & Service Employees only work in that department. If this department were closed, the technicians would be laid off. The total salary for the technicians is $ 75,000 51 52/7. Unities are the same regardless of activity and will not change even if a productie is dropped 53 Interest expense is charged on the outstanding bank loans. The total interest expensei 5 7,000 56 Income taxes are calculated for the company as a whole. The company will have to pay taxes regardless of which product lines it offers. 57 Required: Part A: (25 marks) 1) Restate the segmented income statement using the statement the junior accountant prepared and the notes to the financial statements (Chapter 7 Appendix) Check figures have been provided to ensure you are on the right track. If you are not arriving at the check figures, please discuss with your group members to determine where you went wrong! See the word document provided to your group containing the check figures! Notes The percentage column should be taken as a percentage of sales for example, cost of goods sold % for mountain bikes should be taken as a % of mountain bike sad There may be small rounding differences where total amoun calculator and input the final answer. 51, that is ok! Make sure you are using full Excel functionality and entering formulas into each cell You cannot use your Mountain Sports Segmented income Statement By Product Line For the Year Ended December 31, 2019 TOTAL Cross Country Sk Packages Mountain Bes Percent Parts and Service Department Amount Percent Anovel Percent Amount 05 OF 05 FOODSEN Ca 03 as 04 Accessories Percent Amount Dropdowns + Amount Percent Note from Kelly, Junior accountant The sales and cost of goods sold information correct so I slotted it in the owners confirm that these were correct). As for the rest. up to you The store managers are paid a total yearly salary. They are responsible for all of the departments. These managers will continue to work even if any of the divisions are closed. $ 78,000 The Parts & Service Employees only work in that department. If this department were closed, the technicians would be laid off. The total salary for the technicians is $ 75,000 7. Utilities are the same regardless of activity and will not change even if a product line is dropped 8. Interest expense is charged on the outstanding bank loans. The total interest expense is 7,000 9. Income taxes are calculated for the company as a whole. The company will have to pay taxes regardless of which product lines it offers Required: Part A: (25 marks) 1) Restate the segmented income statement using the statement the junior accountant prepared and the notes to the financial statements (Chapter 7 Appendix) Check figures have been provided to ensure you are on the right track. If you are not arriving at the check figures, please discuss with your group members to determine where you went wrong! See the word document provided to your group containing the check figures! Notes: The percentage column should be taken as a percentage of sales (for example, cost of goods sold % for mountain bikes should be taken as a % of mountain bike sales) There may be small rounding differences where total amounts are off by $1, that is ok! Make sure you are using full Excel functionality and entering formulas into each cell. You cannot use your calculator and input the final answer. Mountain Sports Ltd. Segmented Income Statement-By Product Line Cross Country Ski Packages Amount Percent SS SALES 621,047 Les Variable Costs (MUST BE LISTED ALPHABETICALLY 67 Cost of Goods Sold 276,633 L 59 30 71 TOTAL 72 73 less Tracnable Fived Costs (MUST BE USTED ALPHABETICALLY 74 75 76 TOTAL Traceable Fixed Costs 77 36 les Comman Fived Costs (MUST BE LISTED ALPHABETICALLY) 79 01 Case Ind 03 02 100% 44.4% D Mountain Sports Und Segmented income Statement By Product ne for the Year Ended December 31, 2019 Mountain Bikes Amount Percent 734,066 341414 Of 05 Accessories Amount Prant 100.0% 287,590 46.5% 72,759 OF Dropdown 100.0% 25.3% Parts and Service Department Amount Percent 100.0 138,215 26,781 1936 TOTAL Amount 1781918 217.547 Percent 200 40.2 corred to sotted it in the users contened that these were corect). As for the rest.Pat's up to you Nots from Instructor Any figures provided in the statement are check figures. If you do not arrive at these numbers please revisit and discuss with your group membe It's your group's responsibility to ensure that the check figures match the original chech provided TAN 76 TOTAL Tracmable Five Co 78 Les Common Fisad Cods (MUST BE LISTED ALPHABETICALLY 79 #D NE 82 90 ME 52 Part 25 Analysis (1 mark 2. Which produd ne does the best job of turning sales into pra 93 hent: see "sto" questions in chapter 7 workbook) 34 95 01 as 03 Cave do 34 AT " # GE 225 86 + A B C 91 E F 92 Part 2b: Analysis (16 marks) 2. Which product line does the best job of turning sales into profits? 93 (hint: see "SEG" questions in chapter 7 workbook) 94 95 3. Management has been trying to decide if any departments should be closed. Based on the segmented income statement you prepared, what are your recommendations to management? Which (if any) department should be 96 closed? 97 4. Management had been considering closing the Parts & Service Department based on the segmented income statement that the junior accountant prepared. If this: gment were closed, management estimates that sales for both Cross Country Skis and Mountain Bikes will decrease (see percentage below). Calculate the overall decrease in income to the company as a whole if the parts & service department is closed. 98 Decrease in cross country skis and 8% 99 mountain bikes. 100 101 Show all amounts as positive numbers: 102 Contribution Margin Lost: Parts & Service Department 103 Cross Country Skis 104 Mountain Bikes 105 Total CM Lost 106 Fixed Costs Avoided 107 Increase (decrease) in income 108 109 5. Based on both quantitative and qualitative analysis, should the Parts & Service Department be closed? Explain to management in a way that they can understand. Be sure to use your answer from the previous part in your response. Do not give textbook answers, use question datal (2 marks) 110 D G A6 X fx A note from the junior accountant, Kelly: A B C D E G H Fixed Costs Avoided 107 Increase (decrease) in income 108 109) 5. Based on both quantitative and qualitative analysis, should the Parts & Service Department be closed? Explain to management in a way that they can understand. Be sure to use your answer from the previous part in your response. Do not give textbook answers, use question data! (2 marks) 110 111 112 113 6.Please write a brief memo to the junior accountant explaining the changes you made to the segmented income statement. Textbook definitions will not be awarded marks. Please use question data and your own words. Even though the junior accountant. has some accounting background, the owners do not. As such, please ensure you write explanations in a way that both the junior accountant and the owners can understand. (5 marks) 114 115 116 117 118 119 120 121