Please answer the following questions below, thank you!!

F H 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. 5 A note from the junior accountant, Kelly: He 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 I just ignored it (keep that between us!). I gove 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 ports & service expense is also correct! 2. I 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 / alloceted 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 compony 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. troceable expense thing? This is so hard! Help! Note from Kelly, Junior accountant. Mountain Sports Ltd. Segmented Income Statement For the Year Ended Dec 31, 2019 This is my first attempt at the segmented income statement. I think it's safe to say that I need help! Parts & Cross Country A B C D G Mountain Sports Ltd. Segmented Income Statement For the Year Ended Dec 31, 2019 Cross Country 10 Ski Packages Mountain Bikes 623,047 TOTAL 1,782,918 11 Sales 734,066 287,590 138,215 12 Cost of goods sold % 44% 47% 25% 19% 13 Cost of goods sold 276,633 341,414 72,789 26,731 717,567 14 Gross Profit 346,414 392,652 214,801 111,484 1,065,351 15 Operating expenses 16 Advertising 38,543 47,352 10,097 8,008 104,000 17 Depreciation 5,570 5,570 5,570 5,570 22,280 18 Property taxes 8,620 8,620 8,620 8,620 34,478 19 Rent 4 28,372 28,372 28,372 28,372 113,488 20 Parts & service expense 5 35,625 41,973 16,444 0 94,042 21 Salaries & commissions 6 106,639 106,639 106,639 75,000 394,917 22 Utilities 7 25,824 25,824 25,824 25,824 103,297 23 Total Operating Expenses 249,193 264,350 201,566 151,393 866,502 24 Operating income (loss) 97,221 128,302 13,235 -39,909 198,849 25 Interest expense 8 1,750 1,750 1,750 1,750 7,000 26 Income (Loss) before taxes, 95,471 126,552 11,485 -41,659 191,849 27 Income tax 26.00% 17,431 20,537 8,046 3,867 49,881 28 Net Income (Loss) $78,040 $106,015 $3,439 -$45,526 $141,969 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 TOTAL Mountain Accessories Parts & Service 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 5,000 789 Notes 1 2 3 E Accessories F Parts & Service H the property taxes are set by the Chy and do not change an change in ve components 5.000 Pentage based on each departments AT Parts and services perses with tales of strycktain bikes, and accessories. There are parts & expens for the pr&e M 4Sales commissions are paid on sales for cross country mountain bikes, and accessones. The Parts & Service depenent nostamales comme on their sales 107 Sales commutery, total yearty salary of employees that set ks, kes, antacones. These wille w for the mpany mandless of which products are offered s $ $1,000 The store managers are per a total peally salary. They are responsible for all of the departments. These managen will continue to work even any of the divisions are 78.000 The Parts & Service Empayess only work in that department if the department we dused, the techna wodd be lid off. The total salary for the dis 75,000 52. Uties are the same gardess of activity and will not change even a product in Interest expense is charged on the standing benk kens. The total interest expense 57.000 conta are calleted for the company as a whole. The company will have to pay tres regardless of which product lines offers Required PartA (25 mark) rong! See 1) Rate the segmented income statement ning the statement the junior accountant prepared and the notes to the financial statement (Chapter 7 Append Check figures have been provided to ensure you are on the right track. If you are not arriving at the check figures, please das with your group members to determine where the word document provided to your group containing the check figure PORE s sold % for mountain bikes should be taken as a % of mantan ning fu Excel functionality a forms into eachel. You cannot your The pentage column should be taken as a percentage of sales (for example, conte There may be small rounding differences where total amounts are off by $1, thats of calculator and input the final ener Mountain Sports N Segmented Income Statement By Product Line For the Year Ended December 11, 2015 Mountain Bes TOTAL Din Country Ski Packages Apart Peat A $ Aces AMOUS Pokem Parts and Service Department Amount Pent Amort Percent Note from Kay, Jun The sales and come s But ther of good solid information is owners confirmed there's sted Rahstan components Manity a 1,000 based on each segments 36 Parts and services expense varies with sales of cross country this mountain bikes and accessories. There are no parts & unice mpmie for the parts & service department 4 commions are paid on sales for cross country is mountain bikes a acceries the Parts & Service department amplayas de nat en les commisi 83 Sales commissons 118 Total yearly salary of employees that set skis, bikes, and accessories. These employees will continue to work for the company regardless of which product lines are offered 48 The store managers are pad a total yearly salary. They are responsible for all of the expartments. These managers will continue to work even if any of the divisions are closed S 78.000 The Parts & Service Employees only work in that department, if this ware slosed, the technicians would be laid off. The total salary for the technicians i 10 75,000 51 32 7.Utilities are the same regardless of activity and will not change even if a product line is dropped 7,000 34. Interest expense is charged on the outstanding bank loans. The total interest expense is s income taxes are calculated for the company as a whole. The company will have to pay taxes regardless of which product limit offers 56 57 Required Part A (25 mark 1) Restate the segmented income statement using the statement the junior accountant prepared and the notes to the financial statements (Chapter 7 Appenda) Check figures have been provided to ensure you are on the right track. If you are not arriving at the check figures, please discum with your group members to determine where you went wrong! See the word decument provided to your group containing the check figured 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 s 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 Sport mittemalle traductive Note from Kelly, unier accountant The sales and cost of gooch said inharmation is correct so slotted it in the owners confirmed that these were correct. As for the rest that's up to you czech Cross Country Si Packages Amort 621047 100% Variable Cuts MUST BE USTED ALPHABETICALLY Cet of Good Sold 276.611 44.4% Traonatie Fland Coits MUST USTED AUHATICALLY TOTAL Table Fid Cant 78 Common Fixed Coats MUST USTED ALPHABETICALLY 75 M 41 12 83 SALES KT AV 90 FREZE 71 TOTAL 75 KER 87 M NE Part 2 Analysis (16 market D Segmented one Statement by Product Line For the Year Ended Deander 31, 2009 Motan Aris Art Percent 734066 247,00 341,414 72,7 Anot 100% AN 0 Pent 300 153 M Parts and Service Departm Amout Percen 118.215 26331 TOTAL Amort 100.0% 1329 1935 347447 Per 1000 4025 Dropdowns Netto Any used in the statement are check Spurs you do not arive at these number and with your grove mar responsibility to ensure that the check figs match the original check f + 92 Part 2b: Analysis (16 marks) 2. Which product line does the best job of turning sales Into profits? (hint 93 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 of any) department should be closed? 96 97 4. Management had been considering closing the Parts & Service Department based on the segmented income statement that the junior accountant prepared. If this segment 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 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) 110 111 112 113 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 F H 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. 5 A note from the junior accountant, Kelly: He 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 I just ignored it (keep that between us!). I gove 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 ports & service expense is also correct! 2. I 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 / alloceted 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 compony 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. troceable expense thing? This is so hard! Help! Note from Kelly, Junior accountant. Mountain Sports Ltd. Segmented Income Statement For the Year Ended Dec 31, 2019 This is my first attempt at the segmented income statement. I think it's safe to say that I need help! Parts & Cross Country A B C D G Mountain Sports Ltd. Segmented Income Statement For the Year Ended Dec 31, 2019 Cross Country 10 Ski Packages Mountain Bikes 623,047 TOTAL 1,782,918 11 Sales 734,066 287,590 138,215 12 Cost of goods sold % 44% 47% 25% 19% 13 Cost of goods sold 276,633 341,414 72,789 26,731 717,567 14 Gross Profit 346,414 392,652 214,801 111,484 1,065,351 15 Operating expenses 16 Advertising 38,543 47,352 10,097 8,008 104,000 17 Depreciation 5,570 5,570 5,570 5,570 22,280 18 Property taxes 8,620 8,620 8,620 8,620 34,478 19 Rent 4 28,372 28,372 28,372 28,372 113,488 20 Parts & service expense 5 35,625 41,973 16,444 0 94,042 21 Salaries & commissions 6 106,639 106,639 106,639 75,000 394,917 22 Utilities 7 25,824 25,824 25,824 25,824 103,297 23 Total Operating Expenses 249,193 264,350 201,566 151,393 866,502 24 Operating income (loss) 97,221 128,302 13,235 -39,909 198,849 25 Interest expense 8 1,750 1,750 1,750 1,750 7,000 26 Income (Loss) before taxes, 95,471 126,552 11,485 -41,659 191,849 27 Income tax 26.00% 17,431 20,537 8,046 3,867 49,881 28 Net Income (Loss) $78,040 $106,015 $3,439 -$45,526 $141,969 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 TOTAL Mountain Accessories Parts & Service 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 5,000 789 Notes 1 2 3 E Accessories F Parts & Service H the property taxes are set by the Chy and do not change an change in ve components 5.000 Pentage based on each departments AT Parts and services perses with tales of strycktain bikes, and accessories. There are parts & expens for the pr&e M 4Sales commissions are paid on sales for cross country mountain bikes, and accessones. The Parts & Service depenent nostamales comme on their sales 107 Sales commutery, total yearty salary of employees that set ks, kes, antacones. These wille w for the mpany mandless of which products are offered s $ $1,000 The store managers are per a total peally salary. They are responsible for all of the departments. These managen will continue to work even any of the divisions are 78.000 The Parts & Service Empayess only work in that department if the department we dused, the techna wodd be lid off. The total salary for the dis 75,000 52. Uties are the same gardess of activity and will not change even a product in Interest expense is charged on the standing benk kens. The total interest expense 57.000 conta are calleted for the company as a whole. The company will have to pay tres regardless of which product lines offers Required PartA (25 mark) rong! See 1) Rate the segmented income statement ning the statement the junior accountant prepared and the notes to the financial statement (Chapter 7 Append Check figures have been provided to ensure you are on the right track. If you are not arriving at the check figures, please das with your group members to determine where the word document provided to your group containing the check figure PORE s sold % for mountain bikes should be taken as a % of mantan ning fu Excel functionality a forms into eachel. You cannot your The pentage column should be taken as a percentage of sales (for example, conte There may be small rounding differences where total amounts are off by $1, thats of calculator and input the final ener Mountain Sports N Segmented Income Statement By Product Line For the Year Ended December 11, 2015 Mountain Bes TOTAL Din Country Ski Packages Apart Peat A $ Aces AMOUS Pokem Parts and Service Department Amount Pent Amort Percent Note from Kay, Jun The sales and come s But ther of good solid information is owners confirmed there's sted Rahstan components Manity a 1,000 based on each segments 36 Parts and services expense varies with sales of cross country this mountain bikes and accessories. There are no parts & unice mpmie for the parts & service department 4 commions are paid on sales for cross country is mountain bikes a acceries the Parts & Service department amplayas de nat en les commisi 83 Sales commissons 118 Total yearly salary of employees that set skis, bikes, and accessories. These employees will continue to work for the company regardless of which product lines are offered 48 The store managers are pad a total yearly salary. They are responsible for all of the expartments. These managers will continue to work even if any of the divisions are closed S 78.000 The Parts & Service Employees only work in that department, if this ware slosed, the technicians would be laid off. The total salary for the technicians i 10 75,000 51 32 7.Utilities are the same regardless of activity and will not change even if a product line is dropped 7,000 34. Interest expense is charged on the outstanding bank loans. The total interest expense is s income taxes are calculated for the company as a whole. The company will have to pay taxes regardless of which product limit offers 56 57 Required Part A (25 mark 1) Restate the segmented income statement using the statement the junior accountant prepared and the notes to the financial statements (Chapter 7 Appenda) Check figures have been provided to ensure you are on the right track. If you are not arriving at the check figures, please discum with your group members to determine where you went wrong! See the word decument provided to your group containing the check figured 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 s 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 Sport mittemalle traductive Note from Kelly, unier accountant The sales and cost of gooch said inharmation is correct so slotted it in the owners confirmed that these were correct. As for the rest that's up to you czech Cross Country Si Packages Amort 621047 100% Variable Cuts MUST BE USTED ALPHABETICALLY Cet of Good Sold 276.611 44.4% Traonatie Fland Coits MUST USTED AUHATICALLY TOTAL Table Fid Cant 78 Common Fixed Coats MUST USTED ALPHABETICALLY 75 M 41 12 83 SALES KT AV 90 FREZE 71 TOTAL 75 KER 87 M NE Part 2 Analysis (16 market D Segmented one Statement by Product Line For the Year Ended Deander 31, 2009 Motan Aris Art Percent 734066 247,00 341,414 72,7 Anot 100% AN 0 Pent 300 153 M Parts and Service Departm Amout Percen 118.215 26331 TOTAL Amort 100.0% 1329 1935 347447 Per 1000 4025 Dropdowns Netto Any used in the statement are check Spurs you do not arive at these number and with your grove mar responsibility to ensure that the check figs match the original check f + 92 Part 2b: Analysis (16 marks) 2. Which product line does the best job of turning sales Into profits? (hint 93 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 of any) department should be closed? 96 97 4. Management had been considering closing the Parts & Service Department based on the segmented income statement that the junior accountant prepared. If this segment 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 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) 110 111 112 113 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