Problem $6-21($Algo$)$ Segment Reporting and Decision$-$Making $[$LO$6-4]$

Vulcan Company$$s contribution format income statement for June is as follows:

Vulcan Company

Income Statement

For the Month Ended June $30$

Sales $ $900,000$

Variable expenses $300,000$

Contribution margin $600,000$

Fixed expenses $495,000$

Net operating income $ $105,000$

Management is disappointed with the company$$s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following:

The company is divided into two sales territories$$Northern and Southern. The Northern Territory recorded $$400,000$ in sales and $$200,000$ in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $$156,000$ and $$145,000$ are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories.

The company is the exclusive distributor for two products$$Paks and Tibs. Sales of Paks and Tibs totaled $$190,000$ and $$210,000,$ respectively, in the Northern territory during June. Variable expenses are $29\%$ of the selling price for Paks and $69\%$ for Tibs. Cost records show that $$93,100$ of the Northern Territory$$s fixed expenses are traceable to Paks and $$46,200$ to Tibs, with the remainder common to the two products.

Required:

$1-$a$.$ Prepare contribution format segmented income statements for the total company broken down between sales territories.

$1-$b$.$ Prepare contribution format segmented income statements for the Northern Territory broken down by product line.