Question
Vulcan Company's contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales $800,000 Variable expenses
Vulcan Company's contribution format income statement for June is as follows:
Vulcan Company
Income Statement
For the Month Ended June 30
Sales $800,000
Variable expenses 300,000
Contribution margin 500,000
Fixed expenses 450,000
Net operating income $50,000
Management is disappointed with the company's 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 $300,000 in sales and $150,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $123,000 and $100,000 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 $105,000 and $195,000, respectively, in the Northern territory during June. Variable expenses are 24% of the selling price for Paks and 64% for Tibs. Cost records show that $52,500 of the Northern Territory's fixed expenses are traceable to Paks and $40,950 to Tibs, with the remainder common to the two products.
Required:
1-a. Put together a contribution format segmented income statements for the total company broken down between sales territories.
1-b. Put together a contribution format segmented income statements for the Northern Territory broken down by product line.
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