Problem 6-19 Segment Reporting and Decision Making [LO4] - Please explain how yo
ID: 2426289 • Letter: P
Question
Problem 6-19 Segment Reporting and Decision Making [LO4] -
Please explain how you arrived at your answers. This really helps me a lot! Thank you!
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 territories—Central and Eastern. The Central Territory recorded $400,000 in sales and $180,000 in variable expenses during May. The remaining sales and variable expenses were recorded in the Eastern Territory. Fixed expenses of $160,000 and $150,000 are traceable to the Central and Eastern Territories, respectively. The rest of the fixed expenses are common to the two territories.
The company is the exclusive distributor for two products—Awls and Pows. Sales of Awls and Pows totaled $150,000 and $250,000, respectively, in the Central Territory during May. Variable expenses are 30% of the selling price for Awls and 54% for Pows. Cost records show that $75,000 of the Central Territory’s fixed expenses are traceable to Awls and $57,500 to Pows, with the remainder common to the two products.
Prepare contribution format segmented income statements for the total company broken down between sales territories. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.)
Problem 6-19 Segment Reporting and Decision Making [LO4]
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 territories—Central and Eastern. The Central Territory recorded $400,000 in sales and $180,000 in variable expenses during May. The remaining sales and variable expenses were recorded in the Eastern Territory. Fixed expenses of $160,000 and $150,000 are traceable to the Central and Eastern Territories, respectively. The rest of the fixed expenses are common to the two territories.
The company is the exclusive distributor for two products—Awls and Pows. Sales of Awls and Pows totaled $150,000 and $250,000, respectively, in the Central Territory during May. Variable expenses are 30% of the selling price for Awls and 54% for Pows. Cost records show that $75,000 of the Central Territory’s fixed expenses are traceable to Awls and $57,500 to Pows, with the remainder common to the two products.
Prepare contribution format segmented income statements for the total company broken down between sales territories. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.)
1b.
Prepare contribution format segmented income statements for the Central Territory broken down by product line. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.)
The most recent monthly contribution format income statement for Reston Company is given below:Explanation / Answer
Answer 1.a. Contribution Format Income Statement Particulars Sales Territories Total Central Eastern Amount Amount % Amount % Amount % A. Sales 400,000.0 100.0 500,000.0 100.0 900,000.0 100.0 (900000 - 400000) B. Less: Variable Costs 180,000.0 45.0 220,000.0 44.0 400,000.0 44.4 (180000/400000 X 100) (400000-180000) (220000/500000 X 100) C. Contribution (A-B) 220,000.0 55.0 280,000.0 56.0 500,000.0 55.6 (2200000/400000 X 100) (280000/500000 X 100) D . Traceable Fixed Expenses 160,000.0 40.0 150,000.0 30.0 310,040.0 34.4 (160000/400000 X 100) (150000 / 500000 X 100) E. Territory Net Income (C-D) 60,000.0 15.0 130,000.0 26.0 190,015.0 21.1 F. Untraceable Fixed Expenses (450000-310000) 139,960.0 15.6 Net Income (E-F) 50,055.0 5.6 Answer 1.b. Contribution Format Income Statement of Central Territory Product Awls Product Pows Total Amount % Amount % Amount % Sales 150000 100 250000 100 400000 100 Less: Variable Costs 45000 30 135000 54 180000 45 (150000 X 30%) (250000 X 54%) Contribution 105000 70 115000 46 220000 55 Traceable Fixed Expenses 75000 50 57500 23 132500 33.125 Product Net Income 30000 20 57500 23 87500 21.875 Untraceable Fixed Expenses (160000-132500) 27500 6.875 Net Income 60000 15