Following is the information on Paragon\'s Company\'s threeproduct lines: 1 2 3
ID: 2433979 • Letter: F
Question
Following is the information on Paragon's Company's threeproduct lines: 1 2 3 Revenue 7,160,000 1,900,000 4,200,000 Variable cost percentage ofsales 60% 50% 40% Othercosts 859,200 237,500 693,000 Allocated avoidable corporatecosts 349,000 156,000 698,000 Allocated unavoidable corporate costs 570,800 206,500 24,000 a. Construct a segment margin statement for ParagonCompany. b. Explain why the segment margins reported for anorganization unit must be interpreted carefully. Following is the information on Paragon's Company's threeproduct lines: 1 2 3 Revenue 7,160,000 1,900,000 4,200,000 Variable cost percentage ofsales 60% 50% 40% Othercosts 859,200 237,500 693,000 Allocated avoidable corporatecosts 349,000 156,000 698,000 Allocated unavoidable corporate costs 570,800 206,500 24,000 a. Construct a segment margin statement for ParagonCompany. b. Explain why the segment margins reported for anorganization unit must be interpreted carefully.Explanation / Answer
(a)
Product Line
1
2
3
Total
Revenue
$7,160,000
$1,900,000
$4,200,000
$13,260,000
Variable costs
4,296,000
950,000
1,680,000
6,926,000
Contribution margin
2,864,000
950,000
2,520,000
6,334,000
Other costs
859,200
237,500
693,000
1,789,700
Segment margin
2,004,800
712,500
1,827,000
4,544,300
Allocated avoidable costs
349,000
156,000
698,000
1,203,000
Income
$1,655,800
$556,500
$1,129,000
$3,341,300
Unallocated costs
Product Line
1
2
3
Total
Revenue
$7,160,000
$1,900,000
$4,200,000
$13,260,000
Variable costs
4,296,000
950,000
1,680,000
6,926,000
Contribution margin
2,864,000
950,000
2,520,000
6,334,000
Other costs
859,200
237,500
693,000
1,789,700
Segment margin
2,004,800
712,500
1,827,000
4,544,300
Allocated avoidable costs
349,000
156,000
698,000
1,203,000
Income
$1,655,800
$556,500
$1,129,000
$3,341,300
Unallocated costs