E2 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. Total ipped Company Commercial Residential $780,000 $260,000 $520,000 143,000 117,e00 Sales Cost of goods sold Gross margin Selling and administrative expenses 517,400 262,600 374,400 145,600 Book Ask 108,000 140,e00 248,000 $ 14,600 $ 9,000 Print $ 5,600 Net operating income ferences 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 $84,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $54,000 of fixed expenses that would be avoided if the Commercial segment is dropped, and $32,000 of fixed expenses that would be avoided if the Residential 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 review of the intern's segmented income statement. 22 of 22