Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the

image text in transcribedimage text in transcribed

Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Total Company R 4, 675,000 2, 213,000 2, 462,000 Divisions Cloth R 2,750,000 1, 140,000 1,610,000 Leather R 1,925,000 1,073, 000 852,000 Sales Variable expenses Contribution margin Traceable fixed expenses: Advertising Selling and administrative Depreciation Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income 810, 000 625,000 265,000 1, 700,000 762,000 408,000 354, 000 480,000 390,000 133,000 1,003, 000 607,000 330,000 235,000 132,000 697,000 155,000 R R R Top management can't understand why the Leather Division has such a low segment margin when its sales are only 30% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division: Leather Division Product Lines Garments Shoes Handbags R680,000 R820,000 R425,000 Sales Traceable fixed expenses: Advertising Selling and administrative Depreciation Variable expenses as a percentage of sales R 66,000 R 48,000 R 37,000 65% R 85,000 R 53,000 R 74,000 50% R179,000 R 40,000 R 21,000 52% Analysis shows that R94,000 of the Leather Division's selling and administrative expenses are common to the product lines. 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines. Leather Division Product Line Shoes Garments Handbags R RI R R 0 0 0 0 Traceable fixed expenses: Total traceable fixed expenses 0 0 0 0 OR OR 0 R 0 Common fixed expenses: R R

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Irregularities Frauds And The Necessity Of Technical Auditing In Construction Industry

Authors: A. L. M. Ameer

1st Edition

1481799754, 978-1481799751

More Books

Students also viewed these Accounting questions

Question

Change the number given as a percent to a decimal number. 135.9%

Answered: 1 week ago

Question

What is job rotation ?

Answered: 1 week ago

Question

Write a letter asking them to refund your $1,500 down payment.

Answered: 1 week ago