Problem 6-19 Segment Reporting and Decision Making [LO4] The most recent monthly
ID: 2444905 • Letter: P
Question
Problem 6-19 Segment Reporting and Decision Making [LO4] The most recent monthly contribution format income statement for Reston Company is given below: Reston Company Income Statement For the Month Ended May 31 Sales $ 900,000 100.0 % Variable expenses 408,000 45.3 Contribution margin 492,000 54.7 Fixed expenses 480,000 53.3 Net operating income $ 12,000 1.4 % 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: a. The company is divided into two sales territories—Central and Eastern. The Central Territory recorded $400,000 in sales and $208,000 in variable expenses during May. The remaining sales and variable expenses were recorded in the Eastern Territory. Fixed expenses of $180,000 and $145,000 are traceable to the Central and Eastern Territories, respectively. The rest of the fixed expenses are common to the two territories. b. The company is the exclusive distributor for two products—Awls and Pows. Sales of Awls and Pows totaled $160,000 and $240,000, respectively, in the Central Territory during May. Variable expenses are 28% of the selling price for Awls and 68% for Pows. Cost records show that $78,400 of the Central Territory’s fixed expenses are traceable to Awls and $55,200 to Pows, with the remainder common to the two products. Required: 1a. Prepare contribution format segmented income statements for the total company broken down between sales territories. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.) Sales Territory Total Company Central Eastern Amount % Amount % Amount % $ $ $ $ $ $ 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.) Product Line Central Territory Awls Pows Amount % Amount % Amount % $ $ $ $ $ $ rev: 04_02_2014_QC_47765, 10_21_2014_QC_57054, 03_17_2015_QC_CS-10794
Explanation / Answer
Answer:1a
Answer:1 b
Sales Territory Total company Central Eastern Particulars Amount ($) % Amount ($) % Amount ($) % Sales 900000 100 400000 100 500000 100 Variable expenses 408000 45.33333 208000 52 200000 40 Contribution margin 492000 54.66667 192000 48 300000 60 Traceable fixed expenses 325000 36.11111 180000 45 145000 29 Product line segment margin 167000 18.55556 12000 3 155000 31 Common fixed expenses 155000 17.55556 Sales territory segment margin 12000 1