Millard Corporation is a wholesale distributor of office products. It purchases
ID: 2394637 • Letter: M
Question
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff.
The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income statement for May is given below.
Sales Region
The cost of goods sold and shipping expense are both variable. All other costs are fixed.
Required:
Sales Region
West Central East Sales $ 313,000 $ 802,000 $ 703,000 Regional expenses (traceable): Cost of goods sold 96,000 241,000 320,000 Advertising 109,000 243,000 237,000 Salaries 57,000 54,000 111,000 Utilities 9,400 15,800 14,200 Depreciation 24,000 33,000 26,000 Shipping expense 13,000 27,000 37,000 Total regional expenses 308,400 613,800 745,200 Regional income (loss) before corporate expenses 4,600 188,200 (42,200 ) Corporate expenses: Advertising (general) 13,000 41,000 37,000 General administrative expense 18,000 18,000 18,000 Total corporate expenses 31,000 59,000 55,000 Net operating income (loss) $ (26,400 ) $ 129,200 $ (97,200 ) Total Company West Central East Amount Amount Amount Amount Variable expenses Total variable expenses Traceable fixed expenses Total traceable fixed expenses Common fixed expenses Total common fixed expense Net operating income (loss)Explanation / Answer
Total Company West Central East Amount % Amount % Amount % Amount % Sales $1818000 100.0% $313000 100.0% $802000 100.0% $703000 100.0% Variable expenses: Cost of goods sold 657000 36.1% 96000 30.7% 241000 30.0% 320000 45.5% Shipping expense 77000 4.2% 13000 4.2% 27000 3.4% 37000 5.3% Total variable expenses 734000 40.4% 109000 34.8% 268000 33.4% 357000 50.8% Traceable fixed expenses: Advertising 589000 32.4% 109000 34.8% 243000 30.3% 237000 33.7% Salaries 222000 12.2% 57000 18.2% 54000 6.7% 111000 15.8% Utilities 39400 2.2% 9400 3.0% 15800 2.0% 14200 2.0% Depreciation 83000 4.6% 24000 7.7% 33000 4.1% 26000 3.7% Total traceable fixed expenses 933400 51.3% 199400 63.7% 345800 43.1% 388200 55.2% Common fixed expenses: Advertising (general) 91000 5.0% General admin expense 54000 3.0% Total common fixed expense 145000 8.0% Net operating income (loss) $5600 0.3%