Question
Vulcan Companys contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 850,000 Variable
Vulcan Companys contribution format income statement for June is as follows:
Vulcan Company Income Statement For the Month Ended June 30 | ||
Sales | $ | 850,000 |
Variable expenses | 308,000 | |
Contribution margin | 542,000 | |
Fixed expenses | 490,000 | |
Net operating income | $ | 52,000 |
Management is disappointed with the companys performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following:
-
The company is divided into two sales territoriesNorthern and Southern. The Northern Territory recorded $400,000 in sales and $200,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $152,000 and $126,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories.
-
The company is the exclusive distributor for two productsPaks and Tibs. Sales of Paks and Tibs totaled $180,000 and $220,000, respectively, in the Northern territory during June. Variable expenses are 28% of the selling price for Paks and 68% for Tibs. Cost records show that $86,400 of the Northern Territorys fixed expenses are traceable to Paks and $46,200 to Tibs, with the remainder common to the two products.
Required:
1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories.
1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started