Brabant NV of the Netherlands is a wholesale distributor of Dutch cheeses that it sells throughout the European Community. Unfortunately, the company's profits have been declining, which has caused considerable concern. To help understand the condition of the company. the managing director of the company has requested that the monthly income statement be segmented by sales territory. Accordingly, the company's accounting department has prepared the following statement for March, the most recent month. (The Dutch currency is the euro which is designated by €.) Sales Territory Southern Middle Northern Europe Europe Europe Sales €300,000 €800,000 €700,00 Territorial expenses (traceable): Cost of goods sold 93,000 240,000 315,000 Salaries 54,000 56,000 112,000 Insurance 9,000 16,000 14,000 Advertising Depreciation Shipping 105,000 240,000 245,000 21,000 32,000| 28,000 15,000 32,000| 42,000 297,000 616,000 756,000 Total territorial expenses Territorial income (loss) 3,000 184,000 (56,000) before corporate expenses
Brabant NV of the Netherlands is a wholesale distributor of Dutch cheeses that it sells throughout the European Community. Unfortunately, the company's profits have been declining, which has caused considerable concern. To help understand the condition of the company. the managing director of the company has requested that the monthly income statement be segmented by sales territory. Accordingly, the company's accounting department has prepared the following statement for March, the most recent month. (The Dutch currency is the euro which is designated by €.) Sales Territory Southern Middle Northern Europe Europe Europe Sales €300,000 €800,000 €700,00 Territorial expenses (traceable): Cost of goods sold 93,000 240,000 315,000 Salaries 54,000 56,000 112,000 Insurance 9,000 16,000 14,000 Advertising Depreciation Shipping 105,000 240,000 245,000 21,000 32,000| 28,000 15,000 32,000| 42,000 297,000 616,000 756,000 Total territorial expenses Territorial income (loss) 3,000 184,000 (56,000) before corporate expenses
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Address the question in the picture.
![Brabant NV of the Netherlands is a wholesale distributor of Dutch cheeses that it sells throughout the European
Community. Unfortunately, the company's profits have been declining, which has caused considerable concern. To help
understand the condition of the company. the managing director of the company has requested that the monthly income
statement be segmented by sales territory. Accordingly, the company's accounting department has prepared the following
statement for March, the most recent month. (The Dutch currency is the euro which is designated by €.)
Sales Territory
Southern Middle Northern
Europe
Europe
Europe
Sales
€300,000 €800,000 €700,00
Territorial expenses (traceable):
Cost of goods sold
93,000 240,000 315,000
Salaries
54,000 56,000 112,000
Insurance
9,000
16,000
14,000
Advertising
105,000 240,000 245,000
Depreciation
21,000
32,000
28,000
Shipping
15,000
32,000
42,000
Total territorial expenses
297,000 616,000 756,000
Territorial income (loss)
3,000 184,000 (56,000)
before corporate expenses
Corporate expenses:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b3e55d8-44c0-409f-933a-1c39f7e47615%2F1b600366-40bc-46ed-bf93-131c0db48983%2Fdhxylhk_processed.png&w=3840&q=75)
Transcribed Image Text:Brabant NV of the Netherlands is a wholesale distributor of Dutch cheeses that it sells throughout the European
Community. Unfortunately, the company's profits have been declining, which has caused considerable concern. To help
understand the condition of the company. the managing director of the company has requested that the monthly income
statement be segmented by sales territory. Accordingly, the company's accounting department has prepared the following
statement for March, the most recent month. (The Dutch currency is the euro which is designated by €.)
Sales Territory
Southern Middle Northern
Europe
Europe
Europe
Sales
€300,000 €800,000 €700,00
Territorial expenses (traceable):
Cost of goods sold
93,000 240,000 315,000
Salaries
54,000 56,000 112,000
Insurance
9,000
16,000
14,000
Advertising
105,000 240,000 245,000
Depreciation
21,000
32,000
28,000
Shipping
15,000
32,000
42,000
Total territorial expenses
297,000 616,000 756,000
Territorial income (loss)
3,000 184,000 (56,000)
before corporate expenses
Corporate expenses:
![Corporate expenses:
Advertising (general)
15,000 400,000|
35,000
General administrative
20,000
20,000
20,000
Total corporate expenses
35,000
60,000
55,000
Net operating income (loss)
€(32,000) €124,0oo€(111,000)
Cost of goods sold and shipping expenses are both variable: other costs are all fixed. Brabant NV purchases cheeses at
auction and from farmers' cooperatives, and it distributes them in the three territories listed above. Each of the three sales
territories has its own manager and sales stuff. The cheeses vary widely in profitability: some have a high margin and
some have a low margin. (Certain cheeses. after having been aged for long periods. are the most expensive and carry the
highest margins.)
Required:
1. List any disadvantages or weaknesses that you see to the statement format illustrated above.
2. Explain the basis that is apparently being used to allocate the corporate expenses to the territories. Do you agree with
these al locations? Explain.
3. Prepare a new segmented contribution format income statement for May. Showa Total column as well as data for each
territory. In addition for the company as a whole and for each sales territory. show each item on the segmented income
statement as a percent of sales.
4. Analyze the statement that you prepared in (3) above. What points that might help to improve the company's
performance would you bring to management's attention?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b3e55d8-44c0-409f-933a-1c39f7e47615%2F1b600366-40bc-46ed-bf93-131c0db48983%2Fd5q769k_processed.png&w=3840&q=75)
Transcribed Image Text:Corporate expenses:
Advertising (general)
15,000 400,000|
35,000
General administrative
20,000
20,000
20,000
Total corporate expenses
35,000
60,000
55,000
Net operating income (loss)
€(32,000) €124,0oo€(111,000)
Cost of goods sold and shipping expenses are both variable: other costs are all fixed. Brabant NV purchases cheeses at
auction and from farmers' cooperatives, and it distributes them in the three territories listed above. Each of the three sales
territories has its own manager and sales stuff. The cheeses vary widely in profitability: some have a high margin and
some have a low margin. (Certain cheeses. after having been aged for long periods. are the most expensive and carry the
highest margins.)
Required:
1. List any disadvantages or weaknesses that you see to the statement format illustrated above.
2. Explain the basis that is apparently being used to allocate the corporate expenses to the territories. Do you agree with
these al locations? Explain.
3. Prepare a new segmented contribution format income statement for May. Showa Total column as well as data for each
territory. In addition for the company as a whole and for each sales territory. show each item on the segmented income
statement as a percent of sales.
4. Analyze the statement that you prepared in (3) above. What points that might help to improve the company's
performance would you bring to management's attention?
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