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: Company 500,000 250,000 Residential 360,000 140,000 Sales Cost of goods sold $750,000 $250,000 $500,000 140,000 Gross margin Selling and administrative expenses 110,000 104,000 240,000 136,000 Net operating income S 10,000 S6,000 S 4,000 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 $72,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $38,000 of fixed expenses that would be avoided if the Residential segment is dropped and $55,000 of fixed expenses that would be avoided if the Commericial segment is dropped. Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? O Yes No 2-a. Based on the intern's segmented income statement, can you determine how she allocated the company's common fixed expenses to the Commcial and Residential segments? merc Residenti Common fixed expenses