Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 6-19 Segment Reporting and Decision Making [LO4] The most recent monthly contribution format income statement for Reston Company is given below: Reston Company Income

Problem 6-19 Segment Reporting and Decision Making [LO4]

The most recent monthly contribution format income statement for Reston Company is given below:

Reston Company Income Statement For the Month Ended May 31
Sales $ 900,000 100.0 %
Variable expenses 408,000 45.3
Contribution margin 492,000 54.7
Fixed expenses 480,000 53.3

Net operating income $ 12,000 1.4 %

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

A . The company is divided into two sales territoriesCentral and Eastern. The Central Territory recorded $400,000 in sales and $208,000 in variable expenses during May. The remaining sales and variable expenses were recorded in the Eastern Territory. Fixed expenses of $180,000 and $145,000 are traceable to the Central and Eastern Territories, respectively. The rest of the fixed expenses are common to the two territories.

B. The company is the exclusive distributor for two productsAwls and Pows. Sales of Awls and Pows totaled $160,000 and $240,000, respectively, in the Central Territory during May. Variable expenses are 28% of the selling price for Awls and 68% for Pows. Cost records show that $78,400 of the Central Territorys fixed expenses are traceable to Awls and $55,200 to Pows, with the remainder common to the two products.

Required: 1a. Prepare contribution format segmented income statements for the total company broken down between sales territories. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.)

Sales Territory

Total Company Central Eastern
Amount % Amount % Amount %
(Click to select)Territorial segment marginCommon fixed expensesNet operating income (loss)Contribution marginTraceable fixed expensesSalesVariable expenses $ $ $
(Click to select)SalesCommon fixed expensesTerritorial segment marginNet operating income (loss)Traceable fixed expensesContribution marginVariable expenses
(Click to select)SalesTerritorial segment marginTraceable fixed expensesCommon fixed expensesContribution marginNet operating income (loss)Variable expenses

(Click to select)Territorial segment marginTraceable fixed expensesCommon fixed expensesNet operating income (loss)SalesVariable expensesContribution margin
(Click to select)Contribution marginTerritorial segment marginTraceable fixed expensesCommon fixed expensesNet operating income (loss)SalesVariable expenses $ $
(Click to select)Territorial segment marginNet operating income (loss)Common fixed expensesVariable expensesSalesContribution marginTraceable fixed expenses

(Click to select)Common fixed expensesVariable expensesTerritorial segment marginSalesTraceable fixed expensesContribution marginNet operating income (loss)

1b.

Prepare contribution format segmented income statements for the Central Territory broken down by product line. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.)

Product Line

Central Territory Awls Pows
Amount % Amount % Amount %
(Click to select)Product line segment marginSales territory segment marginSalesCommon fixed expensesTraceable fixed expensesVariable expensesContribution margin $ $ $
(Click to select)Contribution marginTraceable fixed expensesCommon fixed expensesSalesSales territory segment marginProduct line segment marginVariable expenses
(Click to select)Traceable fixed expensesVariable expensesProduct line segment marginCommon fixed expensesSales territory segment marginSalesContribution margin
(Click to select)Product line segment marginSalesTraceable fixed expensesSales territory segment marginCommon fixed expensesContribution marginVariable expenses
(Click to select)Variable expensesProduct line segment marginTraceable fixed expensesSalesSales territory segment marginContribution marginCommon fixed expenses $ $
(Click to select)Product line segment marginCommon fixed expensesContribution marginSalesVariable expensesSales territory segment marginTraceable fixed expenses
(Click to select)Common fixed expensesTraceable fixed expensesSalesContribution marginVariable expensesSales territory segment marginProduct line segment margin $

$

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

HR Self Audits A Strategy For Continuous Improvement

Authors: Wynette Harewood, Marilyn Silverman

1st Edition

B0BQXT8R3P, 979-8843293192

More Books

Students also viewed these Accounting questions