Question
Vulcan Companys contribution format income statement for June is given below: Vulcan Company Income Statement For the Month Ended June 30 Sales $ 900,000 Variable
Vulcan Companys contribution format income statement for June is given below: |
Vulcan Company Income Statement For the Month Ended June 30 | ||||
Sales | $ | 900,000 | ||
Variable expenses | 400,000 | |||
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Contribution margin | 500,000 | |||
Fixed expenses | 450,000 | |||
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Net operating income | $ | 50,000 | ||
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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: |
a. | The company is divided into two sales territoriesNorthern and Southern. The Northern Territory recorded $500,000 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 $245,000 and $88,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories. |
b. | The company is the exclusive distributor for two productsPaks and Tibs. Sales of Paks and Tibs totaled $250,000 and $250,000, respectively, in the Northern territory during June. Variable expenses are 21% of the selling price for Paks and 59% for Tibs. Cost records show that $102,500 of the Northern Territorys fixed expenses are traceable to Paks and $52,500 to Tibs, with the remainder common to the two products. |
Required: |
1a. | Prepare contribution format segmented income statements for the total company broken down between sales territories. |
1b. | Prepare contribution format segmented income statements for the Northern Territory broken down by product line. |
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