Saved Help 2 Problem 6-21 Segment Reporting and Decision-Making (L06-4) Vulcan Company's contribution format income statement for June is as follows: BOR Vulcan Company Incone Statement For the Month Ended June 30 Sales $750,000 Variable expenses 336, eee Contribution margin 414,000 Fixed expenses 378,000 Net operating income $36, eee Management is disappointed with the company's 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 territoriesNorthern and Southern. The Northern territory recorded $300,000 in sales and $156,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern territory. Fixed expenses of $120,000 and $108,000 are traceable to the Northern and Southern territories, respectively. The rest of the fixed expenses are common to the two territories. b. The company is the exclusive distributor for two products-Paks and Tibs. Sales of Paks and Tibs totaled $50,000 and $250,000, respectively, in the Northern territory during June. Variable expenses are 22% of the selling price for Paks and 58% for Tibs. Cost records show that $30,000 of the Northern territory's foed expenses are traceable to Paks and $40,000 to Tibs, with the remainder common to the two products, Required: 1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories. 1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line. Complete this question by entering your answers in the tabs below. MC Grow Hill .. MILLy www Tibs. Cost records show that $30,000 of the Northern territory's fixed expenses are traceable to Paks and $40,000 to Tibs, with the remainder common to the two products. Required: 1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories. 1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line. Complete this question by entering your answers in the tabs below.. Reg 1A Req 1B Prepare contribution format segmented income statements for the total company broken down between sales territories. (Round the percentage answers to one decimal place (.e.1234 should be entered as 12.3).) Total Company Amount % Northern Amount Sales Territory Southern Amount % Reg 10 > MacBook Air de traceable to Paks and $40,000 to Tibs, the remainder common to the two products. Required: 1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories. 1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line. Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Prepare contribution format segmented income statements for the Northern Territory broken down by product line. (Round the percentage answers to one decimal place (i.e.1234 should be entered as 12.3).) Product Line Paks Tibs Northern Territory Amount % Amount % Amount % 3 Problem 6-28 Segment Reporting; Activity-Based Cost Assignment (L06-4) Book Diversified Products, Inc., has recently acquired a small publishing company that offers three books for sale-a cookbook, a travel guide, and a handy speller. Each book sells for $10. The publishing company's most recent monthly income statement is shown below. Product Line Total Travel Handy Company Cookbook Guide Spelter Sales $ 300,000 $90,000 $150,000 $60,000 Expenses: Printing costs 102,000 27,000 63,000 12,000 Advertising 36,600 13,500 19,500 3,000 General sales 18,000 5,400 9,000 3,600 Salaries 33,000 18,000 9,000 6, eee Equipment depreciation 9,000 3,000 3,000 3, eee Sales commissions 30,000 9,000 15,000 6,000 General administration 42,000 14,880 14,000 14,000 Warehouse rent 12,000 3,600 6,000 2,400 Depreciation office facilities 3,000 1.000 1.000 1,000 Total expenses 285,000 94,500 139,500 51,000 Net operating incone (less) $ 15,000 $(4,500) $ 10,500 $ 9,000 The following additional information is available: a. Only printing costs and sales commissions are variable, all other costs are fixed. The printing costs (which include materials, labor, and variable overhead) are traceable to the three product lines as shown in the income statement above. Sales commissions are 10% of sales b. The same equipment is used to produce all three books, so the equipment depreciation cost has been allocated equally among the three product lines. An analysis of the company's activities indicates that the equipment is used 30% of the time to produce cookbooks, 50% of the time to produce travel guides, and 20% of the time to produce handy spellers. c. The warehouse is used to store finished units of product, so the rental cost has been allocated to the product lines on the basis of sales dollars. The warehouse rental cost is $3 per square foot per year. The warehouse contains 48,000 square feet of space, of which 7.200 square feet is used by the cookbook line 24,000 square feet by the travel guideline, and 16,800 square feet by the handy speller line. 3 LIVE OM. d. The general sales cost above includes the salary of the sales manager and other sales costs not traceable to any specific product line. This cost has been allocated to the product lines on the basis of sales dollars. e. The general administration cost and depreciation of office facilities both relate to administration of the company as a whole. These costs have been allocated equally to the three product lines. c. All other costs are traceable to the three product lines in the amounts shown on the income statement above. eBook The management of Diversified Products, Inc., is anxious to improve the publishing company's 5% return on sales. Required: 1. Prepare a new contribution format segmented income statement for the month. Adjust allocations of equipment depreciation and of warehouse rent as indicated by the additional Information provided. 2. Based on the segmented income statements given in the problem, management plans to eliminate the cookbook because it is not returning a profit, and to focus all available resources on promoting the travel guide. However, based on the new contribution format segmented income statement that you prepared: a. Do you agree with management's plan to eliminate the cookbook? b-1. Compute the contribution margin ratio for each product. b-2. Based on the statement you have prepared, do you agree with the decision to focus all available resources on promoting the travel guide? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 28 Part 1 Reg 28 Part 2 Prepare a new contribution format segmented income statement for the month. Adjust allocations of equipment depreciation and of warehouse rent as indicated by the additional information provided Total Company Cookbook Travel Guide Handy Speller Variable expenses Graw IH & Drou 22 er 6 (1) Seved B Req 1 Reg 2A Req 28 Part 1 Req 28 Part 2 Prepare a new contribution format segmented Income statement for the month. Adjust allocations of e and of warehouse rent as indicated by the additional Information provided. Total Company Cookbook Travel Guide Handy Speller ook Variable expenses: Total variable expenses Traceable fixed expenses: Total traceable fixed expenses Common fixed expenses Mc