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Toxaway Company is a merchandiser that segments its business into two divisions-Commercial and Residential. The company's accounting intern was asked to prepare segmented income
Toxaway Company is a merchandiser that segments its business into two divisions-Commercial and Residential. The company's accounting intern was asked to prepare segmented income statements that the company's divisional managers could use to calculate their break-even points and make decisions. She took the prior month's companywide income statement and prepared the absorption format segmented income statement shown below: Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income. Total Company $ 795,000 535,300 Commercial $ 265,000 148,400 Residential $ 530,000 386,900 259,700 252,000 116,600 110,000 143,100 142,000 $ 7,700 $ 6,600 $ 1,100 In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sales commission on all sales. The company's total fixed expenses include $82,500 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $56,000 of fixed expenses that would disappear if the Commercial segment is dropped, and $34,000 of fixed expenses that would disappear if the Residential segment is dropped.
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