Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Sales Variable expenses Contribution margin Traceable fixed expenses: Advertising Selling and administrative Depreciation Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income Sales Traceable fixed expenses: Total Company R 3,675,000 1,745,500 1,929,500 Traceable fixed expenses: R Advertising Selling and administrative Depreciation Variable expenses as a percentage of sales Total traceable fixed expenses 634,000 449,000 233,000 1,316,000 Common fixed expenses: Top management can't understand why the Leather Division has such a low segment margin when its sales are only 25% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division: 613,500 392,000 221,500 R Leather Division 0 Divisions Cloth Leather R 2,100,000 R 1,575,000 980,000 765,500 1,120,000 809,500 R 320,000 230,000 117,000 667,000 R 453,000 R 0 OR Analysis shows that R108,000 of the Leather Division's selling and administrative expenses are common to the product lines. Required: 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines. Garments R540,000 Leather Division Product Lines Handbags R275,000 R 82,000 R 32,000 R 21,000 60% Garments ▾ 0 314,000 219,000 116,000 649,000 160,500 R 0 OR Shoes R760,000 R114,000 R 37,000 R 58,000 40% Product Line Shoes 0 R R118,000 R 42,000 R 37,000 50% 0 OR Handbags 0 0 0
Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Sales Variable expenses Contribution margin Traceable fixed expenses: Advertising Selling and administrative Depreciation Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income Sales Traceable fixed expenses: Total Company R 3,675,000 1,745,500 1,929,500 Traceable fixed expenses: R Advertising Selling and administrative Depreciation Variable expenses as a percentage of sales Total traceable fixed expenses 634,000 449,000 233,000 1,316,000 Common fixed expenses: Top management can't understand why the Leather Division has such a low segment margin when its sales are only 25% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division: 613,500 392,000 221,500 R Leather Division 0 Divisions Cloth Leather R 2,100,000 R 1,575,000 980,000 765,500 1,120,000 809,500 R 320,000 230,000 117,000 667,000 R 453,000 R 0 OR Analysis shows that R108,000 of the Leather Division's selling and administrative expenses are common to the product lines. Required: 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines. Garments R540,000 Leather Division Product Lines Handbags R275,000 R 82,000 R 32,000 R 21,000 60% Garments ▾ 0 314,000 219,000 116,000 649,000 160,500 R 0 OR Shoes R760,000 R114,000 R 37,000 R 58,000 40% Product Line Shoes 0 R R118,000 R 42,000 R 37,000 50% 0 OR Handbags 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in
terms of the Brazilian currency, the real, R) for last month is given below:
Sales
Variable expenses
Contribution margin
Traceable fixed expenses:
Advertising
Selling and administrative
Depreciation
Total traceable fixed expenses
Divisional segment margin
Common fixed expenses
Operating income
Sales
Traceable fixed expenses:
Total Company
R 3,675,000
1,745,500
1,929,500
Traceable fixed expenses:
R
Advertising
Selling and administrative
Depreciation
Variable expenses as a percentage of sales
Total traceable fixed expenses
634,000
449,000
233,000
1,316,000
Common fixed expenses:
Top management can't understand why the Leather Division has such a low segment margin when its sales are only 25% less than
sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further
segmented into product lines. The following information is available on the product lines in the Leather Division:
613,500
392,000
221,500
R
Leather
Division
0
Divisions
Cloth
Leather
R 2,100,000 R 1,575,000
980,000
1,120,000
R
320,000
230,000
117,000
667,000
R 453,000 R
0
OR
Analysis shows that R108,000 of the Leather Division's selling and administrative expenses are common to the product lines.
Required:
1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines.
Garments
R540,000
Leather Division Product Lines
Handbags
R275,000
R 82,000
R 32,000
R 21,000
60%
Garments
765,500
809,500
0
314,000
219,000
116,000
649,000
160,500
R
0
OR
Shoes
R760,000
R114,000
R 37,000
R 58,000
40%
Product Line
Shoes
0
R
R118,000
R 42,000
R 37,000
50%
0
OR
Handbags
0
0
0
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