Millard Corporation is a wholesale distributor of office products. It purchases
ID: 2395982 • 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:
3. Prepare a new contribution format segmented income statement for May
Sales Region
West Central East Sales $ 313,000 $ 800,000 $ 703,000 Regional expenses (traceable): Cost of goods sold 92,000 239,000 320,000 Advertising 101,000 242,000 239,000 Salaries 59,000 56,000 115,000 Utilities 9,100 16,000 14,100 Depreciation 25,000 30,000 28,000 Shipping expense 18,000 32,000 37,000 Total regional expenses 304,100 615,000 753,100 Regional income (loss) before corporate expenses 8,900 185,000 (50,100 ) Corporate expenses: Advertising (general) 18,000 42,000 35,000 General administrative expense 19,000 19,000 19,000 Total corporate expenses 37,000 61,000 54,000 Net operating income (loss) $ (28,100 ) $ 124,000 $ (104,100 )Explanation / Answer
3) Contribution Format Segmented Income Statement (Amts in $)
Particulars Total Company West Region Central Region East Region Sales (A) 1,816,000 313,000 800,000 703,000 Less: Variable expenses Cost of goods sold 651,000 92,000 239,000 320,000 Shipping expense 87,000 18,000 32,000 37,000 Total Variable Exp. (B) 738,000 110,000 271,000 357,000 Contribution Margin (C = A-B) 1,078,000 203,000 529,000 346,000 Less: Traceable Fixed Exp. Advertising 582,000 101,000 242,000 239,000 Salaries 230,000 59,000 56,000 115,000 Utilities 39,200 9,100 16,000 14,100 Depreciation 83,000 25,000 30,000 28,000 Total traceable fixed exp. (D) 934,200 194,100 344,000 396,100 Net Regional income/(loss) (E = C-D) 143,800 8,900 185,000 (50,100) Common Fixed Exp. Advertising (general) 95,000 General administrative exp. 57,000 Total common fixed exp. (F) 152,000 Net Operating income/(loss) (E-F) (8,200)