Michaels Company segments its income statement into its East and West Divisions.

Question

Michaels Company segments its income statement into its East and West Divisions. The company's overall sales, contribution margin ratio, and net operating income are $600,000, 50%, and $50,000, respectively. The West Division's contribution margin and contribution margin ratio are $150,000 and 75%, respectively. The East Division's segment margin is $70,000. The company has $60,000 of common fixed costs that cannot be traced to either division. Prepare an income statement for Michaels Company that uses the contribution format and is segmented by divisions. (Round your percentage answers to 1 decimal place.)

Explanation / Answer

Divisions Details Total company East West Amount % Amount % Amount % sales (a) 600,000 100 400,000 100 200,000 100 contribution margin ration(b)= (a*50%) 300,000 50 70,000 17.5 150,000 75 operating expenses c = (b-d) 190,000 31.67 fixed cost 60,000 10 net operating income (d) (given) 50,000 8.33

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