Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The company's major product lines are furniture, sports equipment, and household appliances. At a recent meeting of Pacific Rim's board of directors, there was a lengthy discussion on ways to improve overall corporate profitability. The members of the board decided that they required additional financial information about individual corporate operations in order to target areas for improvement. Danielle Murphy, the controller, has been asked to provide additional data that would assist the board in its investigation. Murphy believes that income statements, prepared along both product lines and geographic areas, would provide the directors with the required insight into corporate operations. Murphy had several discussions with the division managers for each product line and compiled the following information from these meetings. Furniture 132,500 $ 10.00 6.00 2.00 Product Lines Sports 190,800 $ 25.00 10.00 2.50 Appliances 132,500 $ 20.00 15.50 Total 455,800 Production and sales in units Average selling price per unit Average variable manufacturing cost per unit Average variable selling expense per unit Fixed manufacturing overhead, excluding depreciation Depreciation of plant and equipment Administrative and selling expense 1.50 2$ 498,000 364,640 1,260,000 1. The division managers concluded that Murphy should allocate fixed manufacturing overhead to both product lines and geographic areas on the basis of the ratio of the variable costs expended to total variable costs. 2. Each of the division managers agreed that a reasonable basis for the allocation of depreciation on plant and equipment would be the ratio of units produced per product line (or per geographical area) to the total number of units produced. 3. There was little agreement on the allocation of administrative and selling expenses, so Murphy decided to allocate only those expenses that were traceable directly to a segment. For example, manufacturing staff salaries would be allocated to product lines, and sales staff salaries would be allocated to geographic areas. Murphy used the following data for this allocation. Manufacturing Staff $121,000 141,000 81,000 Sales Staff United States Canada Asia $ 61,000 101,000 251,000 Furniture Sports Appliances

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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4. The division managers were able to provide reliable sales percentages for their product lines by geographical area.
Percentage of Unit Sales
United
States
30%
30%
40%
Canada
20%
30%
40%
Asia
Furniture
Sports
Appliances
50%
40%
20%
Murphy prepared the following product-line income statement based on the data presented above.
PACIFIC RIM INDUSTRIES
Segmented Income Statement by Product Lines
For the Fiscal Year Ended April 30, 20x0
Product Lines
Furniture
Sales in units
Sales
Variable manufacturing and selling costs
Contribution margin
Fixed costs:
Fixed manufacturing overhead
Depreciation
Administrative and selling expenses
Total fixed costs
Sports
190,800
$4,770,000
2,385,000
$2,385,000
Appliances
132,500
$2,650,000
2,252,500
$397,500
Unallocated
Total
132,500
$1,325,000
1,060,000
$ 265,000
$8,745,000
5,697,500
$3,047,500
2$
92,651
106,000
121,000
$ 319,651
$ (54,651) $1,882,895
$ 208,465
152,640
141,000
$ 502,105
$ 196,884
106,000
81,000
$ 383,884
2$
917,000
$ 917,000
$(917,000)
$ 498,000
364,640
1,260,000
$2,122,640
$ 924,860
Operating income (loss)
$
13,616
Required:
1. Prepare a segmented income statement for Pacific Rim Industries based on the company's geographical areas. The statement
should show the operating income for each segment. (Do not round your intermediate calculations and round your final answers to
the nearest dollar amount.)
Transcribed Image Text:4. The division managers were able to provide reliable sales percentages for their product lines by geographical area. Percentage of Unit Sales United States 30% 30% 40% Canada 20% 30% 40% Asia Furniture Sports Appliances 50% 40% 20% Murphy prepared the following product-line income statement based on the data presented above. PACIFIC RIM INDUSTRIES Segmented Income Statement by Product Lines For the Fiscal Year Ended April 30, 20x0 Product Lines Furniture Sales in units Sales Variable manufacturing and selling costs Contribution margin Fixed costs: Fixed manufacturing overhead Depreciation Administrative and selling expenses Total fixed costs Sports 190,800 $4,770,000 2,385,000 $2,385,000 Appliances 132,500 $2,650,000 2,252,500 $397,500 Unallocated Total 132,500 $1,325,000 1,060,000 $ 265,000 $8,745,000 5,697,500 $3,047,500 2$ 92,651 106,000 121,000 $ 319,651 $ (54,651) $1,882,895 $ 208,465 152,640 141,000 $ 502,105 $ 196,884 106,000 81,000 $ 383,884 2$ 917,000 $ 917,000 $(917,000) $ 498,000 364,640 1,260,000 $2,122,640 $ 924,860 Operating income (loss) $ 13,616 Required: 1. Prepare a segmented income statement for Pacific Rim Industries based on the company's geographical areas. The statement should show the operating income for each segment. (Do not round your intermediate calculations and round your final answers to the nearest dollar amount.)
Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The company's
major product lines are furniture, sports equipment, and household appliances. At a recent meeting of Pacific Rim's board of directors,
there was a lengthy discussion on ways to improve overall corporate profitability. The members of the board decided that they
required additional financial information about individual corporate operations in order to target areas for improvement.
Danielle Murphy, the controller, has been asked to provide additional data that would assist the board in its investigation. Murphy
believes that income statements, prepared along both product lines and geographic areas, would provide the directors with the
required insight into corporate operations. Murphy had several discussions with the division managers for each product line and
compiled the following information from these meetings.
Furniture
132,500
$ 10.00
6.00
2.00
Product Lines
Sports
190,800
25.00
Appliances
132,500
$ 20.00
15.50
1.50
Total
455,800
Production and sales in units
Average selling price per unit
Average variable manufacturing cost per unit
Average variable selling expense per unit
Fixed manufacturing overhead,
excluding depreciation
Depreciation of plant and equipment
Administrative and selling expense
24
10.00
2.50
$ 498,000
364,640
1,260,000
1. The division managers concluded that Murphy should allocate fixed manufacturing overhead to both product lines and geographic
areas on the basis of the ratio of the variable costs expended to total variable costs.
2. Each of the division managers agreed that a reasonable basis for the allocation of depreciation on plant and equipment would be
the ratio of units produced per product line (or per geographical area) to the total number of units produced.
3. There was little agreement on the allocation of administrative and selling expenses, so Murphy decided to allocate only those
expenses that were traceable directly to a segment. For example, manufacturing staff salaries would be allocated to product lines,
and sales staff salaries would be allocated to geographic areas. Murphy used the following data for this allocation.
Manufacturing Staff
$121,000
141,000
81,000
Sales Staff
United States
Canada
Asia
$ 61,000
101,000
251,000
Furniture
Sports
Appliances
Transcribed Image Text:Pacific Rim Industries is a diversified company whose products are marketed both domestically and internationally. The company's major product lines are furniture, sports equipment, and household appliances. At a recent meeting of Pacific Rim's board of directors, there was a lengthy discussion on ways to improve overall corporate profitability. The members of the board decided that they required additional financial information about individual corporate operations in order to target areas for improvement. Danielle Murphy, the controller, has been asked to provide additional data that would assist the board in its investigation. Murphy believes that income statements, prepared along both product lines and geographic areas, would provide the directors with the required insight into corporate operations. Murphy had several discussions with the division managers for each product line and compiled the following information from these meetings. Furniture 132,500 $ 10.00 6.00 2.00 Product Lines Sports 190,800 25.00 Appliances 132,500 $ 20.00 15.50 1.50 Total 455,800 Production and sales in units Average selling price per unit Average variable manufacturing cost per unit Average variable selling expense per unit Fixed manufacturing overhead, excluding depreciation Depreciation of plant and equipment Administrative and selling expense 24 10.00 2.50 $ 498,000 364,640 1,260,000 1. The division managers concluded that Murphy should allocate fixed manufacturing overhead to both product lines and geographic areas on the basis of the ratio of the variable costs expended to total variable costs. 2. Each of the division managers agreed that a reasonable basis for the allocation of depreciation on plant and equipment would be the ratio of units produced per product line (or per geographical area) to the total number of units produced. 3. There was little agreement on the allocation of administrative and selling expenses, so Murphy decided to allocate only those expenses that were traceable directly to a segment. For example, manufacturing staff salaries would be allocated to product lines, and sales staff salaries would be allocated to geographic areas. Murphy used the following data for this allocation. Manufacturing Staff $121,000 141,000 81,000 Sales Staff United States Canada Asia $ 61,000 101,000 251,000 Furniture Sports Appliances
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