S Toxaway Company is a merchandiser that segments its business into two divisions-Commercial and Residential. The company's accounting intern was asked to prepare segmented income statements that the company's divisional managers could use to calculate their break-even points and make decisions. She took the prior month's companywide income statement and prepared the absorption format segmented income statement shown below: Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Total Company $ 945,000 630,000 315,000 292,000 $ 23,000 Commercial $ 315,000 170, 100 144,900 130,000 $ 14,900 Residential $ 630,000 459,900 170, 100 162,000 $ 8,100 In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $67,500 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $76,000 of fixed expenses that would disappear if the Commercial segment is dropped, and $54,000 of fixed expenses that would disappear if the Residential segment is dropped. Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? 2. Based on a review of the intern's segmented income statement. a. How much of the company's common fixed expenses did she allocate to the Commercial and Residential segments? b. Which of the following three allocation bases did she most likely used to allocate common fixed expenses to the Commercial and Residential segments: (a) sales, (b) cost of goods sold, or (c) gross margin? 3. Do you agree with the intern's decision to allocate the common fixed expenses to the Commercial and Residential segments? 4. Redo the intern's segmented income statement using the contribution format. 5. Compute the companywide break-even point in dollar sales. 6. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division. 7. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $24,000 and $48,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new hreak even point in dollar caloc for the Commercial Division and the Decidential Division

Toxaway Company is a merchandiser that segments its business into two divisions-Commerclal and Residential. The company's accounting intern was asked to prepare segmented income statements that the company's divisional managers could use to calcuate their break-even points and make decisions. She took the prior month's compariywide income statement and prepared the absorption format segmented income statement shown below: In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $67,500 of common foxed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $76,000 of fixed expenses that would disappear if the Cormmerclal segment is dropped, and $54,000 of fixed expenses that would disappear if the Residentlal segment is dropped Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? 2. Based on a review of the intern's segmented income statement. a. How much of the company's common fixed expenses did she allocate to the Cormmercial and Residential segments? b. Which of the following three allocation bases did she most likely used to allocate common fixed expenses to the Commerchi and Residential seginents (a) sales; (b) cost of goods sold, or (c) gross matgin? 2. Do you agree with the intern's decision to ollocate the common focd expenses to the Commercial and Residental segments? 4. Redo the intern's segmented income statement using the contribution formot 5. Compute the companywide break even point in dollat sales. 6. Compute the break even point in dollar sales for the Commeicial Division and for the Residential Division 7 Assume the company decided to pay its sales representatives in the Commeichal and Residential Divisions a total monthly salary of $24,000 and $48,000, respectively, and to lowerits comparywide sales commission percentage from 10sto58. Calculate the new