Problem 6-26A Restructuring a Segmented Income Statement [LO6-4]

Losses have been incurred at Millard Corporation for some time. In an effort to isolate the problem and improve the companys performance, management has requested that the monthly income statement be segmented by sales region. The companys first effort at preparing a segmented statement is given below. This statement is for May, the most recent month of activity.

	Sales Region
	West		Central		East
Sales	$	311,000	$	801,000	$	700,000
Regional expenses (traceable):
Cost of goods sold		93,000		243,000		311,000
Advertising		104,000		239,000		237,000
Salaries		57,000		55,000		108,000
Utilities		8,500		15,700		13,600
Depreciation		19,000		34,000		30,000
Shipping expense		18,000		31,000		40,000
Total regional expenses		299,500		617,700		739,600
Regional income (loss) before corporate expenses		11,500		183,300		(39,600)
Corporate expenses:
Advertising (general)		18,000		42,000		38,000
General administrative expense		18,000		18,000		18,000
Total corporate expenses		36,000		60,000		56,000
Net operating income (loss)	$	(24,500)	$	123,300	$	(95,600)

Cost of goods sold and shipping expense are both variable; other costs are all fixed. Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the three regions given above. The three regions are about the same size, and each has its own manager and sales staff. The products that the company distributes vary widely in profitability.

Required:

3.

Prepare a new contribution format segmented income statement for May. Show a Total column as well as data for each region. In addition, for the company as a whole and for each sales region, show each item on the segmented income statement as a percent of sales. (Note: % columns may not total due to rounding.) (Round percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3).)

Total Comp

West

Central

East

	Amount	%	Amount	%	Amount	%	Amount	%
Variable expenses:
Total variable expenses
Traceable fixed expenses:
Total traceable fixed expenses
Common fixed expenses:
Total common fixed expense			N/A	N/A	N/A	N/A	N/A	N/A
Net operating income (loss)			N/A	N/A	N/A	N/A	N/A	N/A