Problem 6-26 (Algo) Restructuring a Segmented Income Statement [LO6-4]

Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff.

The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company's first effort at preparing a segmented income statement for May is given below.

Sales Region

West Central East

Regional expenses (traceable): $310,000 $802,000 $704,000

Cost of goods sold 96,000 244,000 316,000

Advertising 102,000 244,000 236,000

Salaries 53,000 50,000 108,000

Utilities 8,800 15,700 13,500

Depreciation 19,000 33,000 26,000

Shipping expense 13,000 35,000 39,000

Total regional expenses 291,800 621,700 738,500

Regional income (loss) before corporate expenses 18,200 180,300 (34,500)

Corporate expenses:

Advertising (general) 17,000 41,000 38,000

General administrative expense 19,000 19,000 19,000

Total corporate expenses 36,000 60,000 57,000

Net operating income (loss) $(17,800) $120,300 $(91,500

The cost of goods sold and shipping expense are both variable. All other costs are fixed.

Required:

3. make a new contribution format segmented income statement for May.(Round percentage answers to 1 decimal place.)

Total Company West Central East

Amount % Amount % Amount % Amount %

------- ----- ------ ------ ------ ------- ----- -------

Variable Expenses

1. ----- ---- ------ ---- ----- ----- ----- -----

2. ----- ---- ----- ---- ------ ----- ---- -----

3. ------ ----- ------ ----- ------ ----- ----- ----

4. ------ ----- ------- ----- ------- ------ ------- -----

Total Variable Expenses

0 0.0 0 0.0 0 0.0 0 0.0

0 0.0 0 0.0 0 0.0 0 0.0

Traceable fixed expenses

1. ----- ----- ------- ----- ---- ---- ----- ----

2. ------ ------ ----- ------ ------ ----- ----- -----

3. ------ ------ ---- ----- ----- ------ ----- ---

4. ----- ------ ----- ------- ----- ---- ----- -----

5. ------ ------ ------ ------ ------ ------ ----- -----

6. ----- ----- ------ -------- ------ ----- ----- ----Total traceable fixed expenses

0 0.0 0 0.0 0 0.0 0 0.0

0 0.0 $ 0 0.0 $0 0.0 $ 0 0.0

Common Fixed Expenses

1. ------ ------ ----- ------- ------- ----- ----- -----

2. ------- ------- ------ ----- ------ ----- ------ -----

3. ------- -------- ------ ------ --------- ------ ----- -----

Total Fixed Common Expense 0 0.0

Net Operating Income $ 0 0.0

Entry for Variable Expenses

• Advertising
• Advertising (general)
• Beginning merchandise inventory
• Commissions
• Cost of goods sold
• Depreciation
• Direct labor
• Direct materials
• Ending merchandise inventory
• Fixed manufacturing overhead
• General administration
• Indirect labor
• Indirect materials
• Purchases
• Salaries
• Sales
• Shipping expense
• Territorial segment margin
• Utilities
• Variable manufacturing overhead

Entry for total Variable Expenses

• Contribution margin
• Gross margin
• Regional segment margin

Entry for Fixed Variable Expense

• Advertising
• Advertising (general)
• Beginning merchandise inventory
• Commissions
• Cost of goods sold
• Depreciation
• Direct labor
• Direct materials
• Ending merchandise inventory
• Fixed manufacturing overhead
• General administration
• Indirect labor
• Indirect materials
• Purchases
• Salaries
• Sales
• Shipping expense
• Territorial segment margin
• Utilities
• Variable manufacturing overhead

Entry for Total Traceable Fixed Expenses

• Contribution margin
• Gross margin
• Regional segment margin

Entry for Common Fixed Expenses

• Advertising
• Advertising (general)
• Beginning merchandise inventory
• Commissions
• Cost of goods sold
• Depreciation
• Direct labor
• Direct materials
• Ending merchandise inventory
• Fixed manufacturing overhead
• General administration
• Indirect labor
• Indirect materials
• Purchases
• Salaries
• Sales
• Shipping expense
• Territorial segment margin
• Utilities
• Variable manufacturing overhead