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Shoe Shock Innovations manufactures athletic shoe inserts that cushion the foot and reduce the impact of exercise on the joints. The company has two divisions,
Shoe Shock Innovations manufactures athletic shoe inserts that cushion the foot and reduce the impact of exercise on the joints. The company has two divisions, Sole Inserts and Heel Inserts. A segmented income statement from last month follows. Sole Inserts Division Heel Inserts Division Total Shoe Shock Sales revenue $494,700 $2,505,000 $2,999,700 Less variable expenses 318,000 2,018,000 2,336,000 Contribution margin 176,700 487,000 663,700 Less traceable fixed expenses 124,700 349,700 474,400 Segment margin $52,000 $137,300 189,300 Common fixed costs 173,200 Net operating income $16,100 Chris Kelly is Shoe Shock's sales manager. Although this statement provides useful information, Chris wants to know how well the company's two distribution channels, specialty footwear stores and drug stores, are performing. Marketing data indicates that 20% of sole inserts and 75% of heel inserts are sold through specialty footwear stores. A recent analysis of corporate fixed costs revealed that 50% of all fixed costs are traceable to specialty footwear stores and 45% of all fixed costs to drug stores. Specialty Footwear Stores Drug Stores Revenue Sole inserts Heel inserts Total revenue Less a : variable expenses Sole inserts Heel inserts Total variable expenses 4 Contribution margin Traceable fixed expenses Segmented margin Common fixed expenses Operating income
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