Problem 6-21 Segment Reporting and Decision-Making [LO6-4] Vulcan Company\'s con
ID: 2564610 • Letter: P
Question
Problem 6-21 Segment Reporting and Decision-Making [LO6-4] Vulcan Company's contribution format income statement for June is as follows Vulcan Company Income Statement For the Month Ended June 30 Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 800,0ee 30e,000 500,000 460,000 $ 40,0ee 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-Northern and Southern. The Northern Territory recorded $400,000 in sales and $208,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory Fixed expenses of $172,000 and $88,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories b. The company is the exclusive distributor for two products-Paks and Tibs. Sales of Paks and Tibs totaled $125,000 and $275,000 respectively, in the Northern territory during June. Variable expenses are 30% of the selling price for Paks and 62% for Tibs. Cost records show that $75,000 of the Northern Territory's fixed expenses are traceable to Paks and $60,500 to Tibs, with the remainder common to the two products Required 1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories 1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line Complete this question by entering your answers in the tabs belowExplanation / Answer
1 Total company Northern Southern Amount % Amount % Amount % Sales 800000 100.0% 400000 100.0% 400000 100.0% Variable expenses 300000 37.5% 208000 52.0% 92000 23.0% Contribution margin 500000 62.5% 192000 48.0% 308000 77.0% Traceable fixed expenses 260000 32.5% 172000 43.0% 88000 22.0% Territorial segment margin 240000 30.0% 20000 5.0% 220000 55.0% Common fixed expenses 200000 25.0% Net operating income 40000 5.0% b Northern Territory Paks Tibs Sales 400000 100.0% 125000 100.0% 275000 100.0% Variable expenses 208000 52.0% 37500 30.0% 170500 62.0% Contribution margin 192000 48.0% 87500 70.0% 104500 38.0% Traceable fixed expenses 135500 33.9% 75000 60.0% 60500 22.0% Product line segment margin 56500 14.1% 12500 10.0% 44000 16.0% Common fixed expenses 36500 9.1% Sales territory segment margin 20000 5.0%