The question to this problem is from problem: 6-19 Segment Reporting and Decision Making [LO4] The most recent monthly contribution format income statement for Reston Company is given below: Income Statement For the Month Ended May 31 Sales......................................$900,000 100% 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 sales and $208,000 in variable expenses during May. The remaining sales and variable expenses were recorded in the Eastern Territory. Fixed expenses of $160, 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 is the exclusive distributor for two products ---Awls and Pows. Sales of Awls and Pows totaled$100,000 and $300,000, respectively, in the Central Territory during May. Variable expenses are 25% of the selling price for Awls and 61% for Pows. Cost records show that $60,000 of the Central Territory's fixed expenses are traceable to Awls and $54,000 to Pows, with the remainder common to the two products Required: 1. Prepare contribution format segment income statements, first showing the total company broken down between sales territories and then showing the Central Territory broken down by product 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 sales. 2. Look at the statement you have prepared showing the total company segmented by sales territory. What points revealed by this statement should be brought to management's attention? 3. Look at the statement you have prepared showing the Central Territory segmented by product lines. What points revealed by this statement should be brought to management's attention?

Student Name: GomezM.Mdl.3 Class: ACC-350 Problem 06-19 1. RESTON COMPANY Segmented Income Statement Sales Territory Sales Variable expenses Contribution margin Traceable fixed expenses Territorial segment margin Common fixed expenses Net operating income Total Company $900,000 100.0% 408,000 45.3% 465,000 54.7% 51.7% 465,000 $27,000 Correct! Central $400,000 208,000 160,000 Eastern $400,000 130,000 51.7% 3.0% Correct! Product Line Sales Variable expenses Contribution margin Traceable fixed expenses Product line segment margin Common fixed expenses Sales territory segment margin Central Territory $400,000 208,000 160,000 130,000 Awls $100,000 Pows $300,000 60,000 54,000 Given Data P06-19: RESTON COMPANY Income Statement For the Month Ended May 31 Sales Variable expenses Contribution margin Fixed expenses Net operating income $900,000 408,000 492,000 465,000 $27,000 100.0% 45.3% 54.7% 51.7% 3.0% Additional data: Central Territory sales Central Territory variable expenses Central Territory fixed expenses Eastern Territory fixed expenses $400,000 $208,000 $160,000 $130,000 Central territory: Awls sales Pows sales Awls variable expenses Pows variable expenses Awls fixed expenses, Central Territory Pows fixed expenses, Central Territory $100,000 $300,000 25% of selling price 61% of selling price $60,000 $54,000