Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 915,000 $ 610,000 $ 305,000 Variable expenses 732,000 518,500 213,500 Contribution margin 183,000 91,500 91,500 Traceable fixed expenses 111,000 51,000 60,000 Segment margin 72,000 $ 40,500 $ 31,500 Common fixed expenses 60,000 Net operating income $ 12,000 Required: 1. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. What is Crossfire’s net operating income (loss) in your new segmented income statement? 2. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?
Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below: Total Company East West Sales $ 915,000 $ 610,000 $ 305,000 Variable expenses 732,000 518,500 213,500 Contribution margin 183,000 91,500 91,500 Traceable fixed expenses 111,000 51,000 60,000 Segment margin 72,000 $ 40,500 $ 31,500 Common fixed expenses 60,000 Net operating income $ 12,000 Required: 1. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. What is Crossfire’s net operating income (loss) in your new segmented income statement? 2. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Crossfire Company segments its business into two regions—East and West. The company prepared a contribution format segmented income statement as shown below:
| Total Company | East | West | |
|---|---|---|---|
| Sales | $ 915,000 | $ 610,000 | $ 305,000 |
| Variable expenses | 732,000 | 518,500 | 213,500 |
| Contribution margin | 183,000 | 91,500 | 91,500 |
| Traceable fixed expenses | 111,000 | 51,000 | 60,000 |
| Segment margin | 72,000 | $ 40,500 | $ 31,500 |
| Common fixed expenses | 60,000 | ||
| Net operating income | $ 12,000 |
Required:
1. Prepare a new segmented income statement based on the break-even dollar sales that you computed in requirements 2 and 3. What is Crossfire’s net operating income (loss) in your new segmented income statement?
2. Do you think that Crossfire should allocate its common fixed expenses to the East and West regions when computing the break-even points for each region?
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