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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 statements

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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 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. In preparing these statements, the intern determined that Toxaway's opy varloble selling and administrative expense is a 10% sales commission on all soles. The company's totai fixed expenses inciude $72,000 of common fixed expenses that would contuve to be incurred even if the Commercial or Residential segments are discontinued, $70,000 of fixed expenses that would disappear if the Commerciai segment is dropped, and $48.000 of fixed expenses that would alsappear if the Residentiai segment is dropped. Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? 2 Based on a revlew of the intern's segmented income statement. a. How much of the company's common fixed expenses did she allocate to the Commercial and Residenual segments? b. Which of the foliowing three allocation bases did she most likely used to allocate common fixed expenses to the Commercial ond Residential segments (o) sales, (b) cost of goods sold, or (c) gross margin? 3. Do you agree with the intern's decision to allocate the common fixed expenses to the Commercial and Resjidential segmenss? 4. Redo the intern's segmented income stotement using the contribution format 5 . Compute the companywide break-even point in dollar sates. 6 Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division. 7. Assbme the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salaty of $21.000 and $42,000, respectively, and to lower its companywide sales commisston percentage from 10% to 5% Caiculate the new break-even point in dollor sales for the Commercial Division and the Residential Division

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