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 $ 750,000 336,000 414,000 378,000 $ 36,000 Management wants to improve profits and gathered the following data: a. The company is divided into two sales territories-Northern and Southern. The Northern territory recorded $300,000 in sales and $156,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern territory. Fixed expenses of $120,000 and $108,000 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 $50,000 and $250,000, respectively, in the Northern territory during June. Variable expenses are 22% of the selling price for Paks and 58% for Tibs. Cost records show $30,000 of the Northern territory's fixed expenses are traceable to Paks and $40,000 to Tibs, with the remainder common to the two products. Required: 1-a. Prepare contribution format income statements for the total company segmented by sales territories. 1-b. Prepare contribution format income statements for the Northern Territory segmented by product line.
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 $ 750,000 336,000 414,000 378,000 $ 36,000 Management wants to improve profits and gathered the following data: a. The company is divided into two sales territories-Northern and Southern. The Northern territory recorded $300,000 in sales and $156,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern territory. Fixed expenses of $120,000 and $108,000 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 $50,000 and $250,000, respectively, in the Northern territory during June. Variable expenses are 22% of the selling price for Paks and 58% for Tibs. Cost records show $30,000 of the Northern territory's fixed expenses are traceable to Paks and $40,000 to Tibs, with the remainder common to the two products. Required: 1-a. Prepare contribution format income statements for the total company segmented by sales territories. 1-b. Prepare contribution format income statements for the Northern Territory segmented by product line.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
$ 750,000
336,000
414,000
378,000
$ 36,000
Management wants to improve profits and gathered the following data:
a. The company is divided into two sales territories-Northern and Southern. The Northern territory recorded $300,000 in sales and
$156,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern territory.
Fixed expenses of $120,000 and $108,000 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 $50,000 and $250,000,
respectively, in the Northern territory during June. Variable expenses are 22% of the selling price for Paks and 58% for Tibs. Cost
records show $30,000 of the Northern territory's fixed expenses are traceable to Paks and $40,000 to Tibs, with the remainder
common to the two products.
Required:
1-a. Prepare contribution format income statements for the total company segmented by sales territories.
1-b. Prepare contribution format income statements for the Northern Territory segmented by product line.
Complete this question by entering your answers in the tabs below.
Required 1A Required 1B
Prepare contribution format income statements for the Northern Territory segmented by product line.
Note: Round the percentage answers to one decimal place (i.e .1234 should be entered as 12.3).
Product Line
Amount
Northern Territory
%
Paks
Tibs
Amount
%
Amount
%
Sales
$ 300,000
100.0 $ 50,000
Variable expenses
156,000
11,000
Contribution margin
Traceable fixed expenses
144,000
100.0
39,000
0.0
$ 250,000
145,000
105,000
0.0
70,000
30,000
40,000
Product line segment margin
74,000
100.0 $
9,000
0.0
$ 65,000
0.0
Common fixed expenses
50,000
Sales territory segment margin
$
24,000
100.0
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