Vulcan Company's contribution format income statement for June is as follows: Vulcan Company Income Statement Sales Variable expenses Contribution margin Fixed expenses Net operating income For the Month Ended June 30 $750,000 336,000 414,000 378,000 Management wants to improve profits and gathered the following data: $ 36,000 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. Prepare contribution format income statements showing the total company segmented by sales territories and then the Northern territory segmented by product line. Show each item on these segmented income statements as a percent of sales. 2. What insights would you share with management about the Northern and Southern territories? 3. What insights would you share with management about Paks and Tibs?
Vulcan Company's contribution format income statement for June is as follows: Vulcan Company Income Statement Sales Variable expenses Contribution margin Fixed expenses Net operating income For the Month Ended June 30 $750,000 336,000 414,000 378,000 Management wants to improve profits and gathered the following data: $ 36,000 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. Prepare contribution format income statements showing the total company segmented by sales territories and then the Northern territory segmented by product line. Show each item on these segmented income statements as a percent of sales. 2. What insights would you share with management about the Northern and Southern territories? 3. What insights would you share with management about Paks and Tibs?
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
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income
For the Month Ended June 30
$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. Prepare contribution format income statements showing the total company segmented by sales territories and then the Northern
territory segmented by product line. Show each item on these segmented income statements as a percent of sales.
2. What insights would you share with management about the Northern and Southern territories?
3. What insights would you share with management about Paks and Tibs?
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