APPLY THE CONCEPTS: Construction of a segmented income statement Ross has decide

Question

APPLY THE CONCEPTS: Construction of a segmented income statement Ross has decided to expand its business into cookware, and plans to manufacture standard, deluxe, and economy cookware in one factory. Common fixed overhead for the factory is estimated to be $51,600, and common selling and administrative expenses are estimated to be $8,600. Sales commissions (a variable cost) of 3% of sales are paid on all product lines. The following estimates are available for 2012: Standard Deluxe Economy Sales Variable cost of goods sold Direct fixed overhead Direct fixed selling and administrative expenses Using this information, construct a segmented income statement that displays the income statement information for each segment of the business and for the business as a whole Enter all amounts as positive numbers. If required, round amounts to the nearest cent $215,000 $387,000 $258,000 77,400 43,215 20,743 107,500 154,800 66,177 44,118 20,210 10,105

Explanation / Answer

Segment Margin Income Statement is prepared as under:

Ross Company Segmented Income Statement For the year 2012 Standard Deluxe Economy Total Sales 2,15,000 3,87,000 2,58,000 8,60,000 Variable Cost of goods sold 1,07,500 1,54,800 77,400 3,39,700 Variable selling expense 6450 11610 7740 25800 Contribution Margin 1,01,050 2,20,590 1,72,860 4,94,500 Less direct fixed expense: Direct fixed overhead 20,210 66,177 43,215 1,29,602 Direct selling and administrative 10,105 44,118 20,743 74,966 Segment Margin 70,735 1,10,295 1,08,902 2,89,932 Less common fixed expenses: Common fixed overhead 51,600 Common selling and administrative 8,600 Operating Income 2,29,732

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