$-$ Problem # $1$: Variable costing and Segment reporting

IT Professionals Guild, Inc.

IT Professionals Guild, Inc., is a prominent association catering to IT

professionals with $20,000$ members. Headquartered centrally, it has

numerous local chapters across the United States. These chapters conduct

monthly meetings to exchange insights on the latest IT trends and

developments. The Guild's monthly publication, 'Tech Innovate,$\text{'}$

disseminates cutting$-$edge developments and thought leadership in the IT

sphere. In addition, the Guild publishes insightful research and reports and

offers professional development courses accredited for continuing education

credits for its members.

Statement of Revenues and Expenses For the Year Ended November $30$

Revenues: $$3,275,000$

Expenses:

Salaries: $$920,000$

Personnel costs: $$230,000$

Occupancy costs: $$280,000$

Reimbursement of member costs to local chapters: $$600,000$

Other membership services: $$500,000$

Printing and paper: $$320,000$

Postage and shipping: $$176,000$

Instructors$$ fees: $$80,000$

General and administrative: $$38,000$

Total expenses: $$3,144,000$

Excess of revenues over expenses: $$131,000$

Segment Information

Upon the board's request, a segmented income statement is to be prepared

for IT Professionals Guild, Inc., highlighting the financial contribution of

each segment. The Guild comprises four divisions: Membership Services,

Publication Subscriptions, Research and Reports, and Professional

Development. The financial analyst, Mike Doyle, is tasked with this

responsibility and has provided the following segment data:

$20,000$ members each pay $$100$ annually. Of this, $$20$ is for the 'Tech

Innovate' subscription.

$-2,500$ additional 'Tech Innovate' subscriptions at $$30$ each were sold, plus

$$100,000$ from ads.

$-$ The magazine's production costs are $$7$ per subscription for printing$/$paper

and $$4$ for postage.

$-28,000$ research publications sold at $$25$ each, with production costs of $$4$

for printing and $$2$ for postage per item.

$-$ Professional development courses saw $2,400$ one$-$day and $1,760$ two$-$day

attendees, priced at $$75$ and $$125$ respectively.

Salary and Space Allocation

$-$ Membership Services: $$210,000$ salary, $2,000$ sq ft

$-$ Publication Subscriptions: $$150,000$ salary, $2,000$ sq ft

$-$ Research and Reports: $$300,000$ salary, $3,000$ sq ft

$-$ Professional Development: $$180,000$ salary, $2,000$ sq ft

$-$ Corporate staff: $$80,000$ salary, $1,000$ sq ft

Personnel costs remain at $25\%$ of salaries for all divisions and the corporate

staff. The $$280,000$ in occupancy costs, apportioned based on square

footage, includes $$50,000$ for a data center utilized by the Research and

Reports Division for data storage.

$-$ Costs for printing and paper, excluding those for publication subscriptions

and research reports, are associated with the Professional Development

Division materials.

$-$ General and administrative expenses cover the comprehensive

management of the Guild. The corporate staff manages essential mailings

and administrative tasks.

Expenses directly linked to corporate staff and undividable costs remain

categorized as common costs, with no need to segregate variable from fixed

expenses.

Assignment Tasks

$1.$ Prepare a segmented income statement for IT Professionals Guild, Inc.,

showing the contribution of each division.

$2.$ Discuss the pros and cons of allocating all the Guild's costs to the four

divisions.