The most recent monthly contribution format income statement for Webbtech Company is given below:

Webbtech Company

Income Statement

For the Month Ended May 31

Revenues . . . . . . . . . . . . . . . . . . . . . . $ 900,000 100.0%

Variable expenses . . . . . . . . . . . . 408,000 45.3

Contribution margin . . . . . . . . . . . 492,000 54.7

Fixed expenses . . . . . . . . . . . . . . 465,000 51.7

Net operating income . . . . . . . . . $ 27,000 3.0%

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 territories Central and Eastern. The Central Territory recorded $ 400,000 in Revenues and $ 208,000 in variable expenses during May. The remaining Revenues and variable expenses were recorded in the Eastern Territory. Fixed expenses of $ 160,000 and $ 130,000 are traceable to the Central and Eastern Territories, respectively. The rest of the fixed expenses are common to the two territories.

b). The company has two divisions Web Hosting and Web Analytics. Revenues for Hosting and Analytics totaled $ 100,000 and $ 300,000, respectively, in the Central Territory during May. Variable expenses are 25% of the selling price for the Hosting Division in the Central Territory. Cost records show that $ 60,000 of the Central Territory's fixed expenses are traceable to Hosting and $ 54,000 to Analytics, with the remainder common to the two divisions.

Required:

(a) Prepare contribution format segmented income statements, first showing the total company broken down between sales territories and then showing the Central Territory broken down by division line. In addition, for the company as a whole and for each segment, show each item on the segmented income statements as a percent of Revenues.

B. Prepare and submit as your response to this assignment, a memo to Webbtech's CEO, Wendy W. Webb, including the statements required in point "A" above, detailing the following:

1. Explain the purpose of each statement and the information it is mean to convey.

2. Provide your analysis of the statement you have prepared showing the total company segmented by sales territory. Elaborate on those points revealed by this statement which you consider should be brought to Wendy's attention. State the actions you would recommend to improve the company's results after analyzing this statement.

3. Provide your analysis of the statement you have prepared showing the Central Territory segmented by divisions. Elaborate on those points revealed by this statement which you consider should be brought to Wendy's attention. State the actions you would recommend to improve the company's results after analyzing this statement