Chapter 10, Problem 6P

Arctic Software Inc. has two product lines. The income statement for the year ended December 31 shows the following:

The products, Num 1 and Num 2, are sold in two territories, North and South, as follows:

The common fixed expenses are traceable to each territory as follows:

The direct expenses of Num 1, $160,000, and of Num 2, $140,000, are not identifiable with either of the two territories.

Required:

1. 1. Prepare income statements for the year, segmented by territory and including a column for the entire company.
2. 2. Why are direct expenses of one type of segment report not direct expenses of another type of segment report?