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Required: a. Prepare an income statement for July segmented by product line. Include a column for the entire firm. b. Prepare an income statement for
Required:
a. Prepare an income statement for July segmented by product line. Include a column for the entire
firm.
b. Prepare an income statement for July segmented by sales territory. Include a column for the entire
firm.
c. Prepare an income statement for July by product line for The Americas sales territory. Include a
column for the territory as a whole.
d. Discuss the value of multilevel segment reporting as a managerial tool. Compare and contrast the
benefits of the reports generated in parts a, b, and c
Problem:
Communications, Incorporated, sells telecommunication products throughout the world in three sales territories: Europe, Asia, and the Americas. For July, all $650,000 of administrative expense is traceable to the territories, except $100,000, which is common to all units and cannot be traced or allocated to the sales territories. The percentage of product line sales made in each of the sales territories and the assignment of traceable fixed expenses follow: | ||||
Sales Territory | ||||
Europe | Asia | The Americas | Total | |
Handset Sales | 50% | 30% | 20% | 100% |
Switchboard Sales | 40 | 40 | 20 | 100 |
Automated Switches Sales | 10 | 30 | 60 | 100 |
Fixed Administrative Expense | $200,000 | $200,000 | $150,000 | $550,000 |
Fixed Selling Expense | $350,000 | $650,000 | $650,000 | $1,650,000 |
The manufacturing takes place in one large facility with three distinct manufacturing operations. Selected product-line cost data follow: | ||||
Handsets | Switchboard | Automated Switches | Total | |
Variable Costs | $18 | $790 | $1,975 | |
Depreciation and Supervision | 200,000 | 200,000 | 170,000 | $600,000* |
Other manufacturing Overhead (Common) | 150,000 | |||
Fixed Administrative Expense (Common) | 1,550,000 | |||
Fixed Selling Expense (Common) | ||||
*Includes common cost of $30,000 | ||||
Unit Sales | Selling Price | |||
Handset | 10,500 | $50 | ||
Switchboard | 2,500 | 1,500 | ||
Automated | 2,000 | 3,200 |
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