Question

In: Accounting

Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and...

Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff.

The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income statement for May is given below.

Sales Region

West Central East
Sales $ 313,000 $ 803,000 $ 704,000
Regional expenses (traceable):
Cost of goods sold 90,000 238,000 317,000
Advertising 101,000 242,000 236,000
Salaries 54,000 58,000 107,000
Utilities 9,500 15,600 13,800
Depreciation 21,000 32,000 25,000
Shipping expense 16,000 32,000 45,000
Total regional expenses 291,500 617,600 743,800
Regional income (loss) before corporate expenses 21,500 185,400 (39,800 )
Corporate expenses:
Advertising (general) 14,000 41,000 32,000
General administrative expense 21,000 21,000 21,000
Total corporate expenses 35,000 62,000 53,000
Net operating income (loss) $ (13,500 ) $ 123,400 $ (92,800 )

The cost of goods sold and shipping expense are both variable. All other costs are fixed.

Required:

3. Prepare a new contribution format segmented income statement for May

Solutions

Expert Solution

Total Company West Central East
Amount % Amount % Amount % Amount %
Sales $1,820,000 100.0% $313,000 100.0% $803,000 100.0% $704,000 100.0%
Variable expenses:
Cost of goods sold $645,000 35.4% $90,000 28.8% $238,000 29.6% $317,000 45.0%
Shipping expenses $93,000 5.1% $16,000 5.1% $32,000 4.0% $45,000 6.4%
Total variable expenses $738,000 40.5% $106,000 33.9% $270,000 33.6% $362,000 51.4%
Contribution margin $1,082,000 59.5% $207,000 66.1% $533,000 66.4% $342,000 48.6%
Traceable fixed expenses:
Advertising $579,000 31.8% $101,000 32.3% $242,000 30.1% $236,000 33.5%
Salaries $219,000 12.0% $54,000 17.3% $58,000 7.2% $107,000 15.2%
Utilities $38,900 2.1% $9,500 3.0% $15,600 1.9% $13,800 2.0%
Depreciation $78,000 4.3% $21,000 6.7% $32,000 4.0% $25,000 3.6%
Total traceable fixed expenses $914,900 50.3% $185,500 59.3% $347,600 43.3% $381,800 54.2%
Reginal segment margin $167,100 9.2% $21,500 6.9% $185,400 23.1% ($39,800) -5.7%
Common fixed expenses:
Advertising (general) $87,000 4.8%
General administratice expenses $63,000 3.5%
Total common fixed expense $150,000 8.2%
Net operating income (loss) $              17,100 0.9%

Related Solutions

Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff. The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff. The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff. The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff. The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff. The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and...
Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff. The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income...
Problem 7-26 Restructuring a Segmented Income Statement [LO7-4] Millard Corporation is a wholesale distributor of office...
Problem 7-26 Restructuring a Segmented Income Statement [LO7-4] Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff. The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The...
University Wholesale Company purchases merchandise from a variety of manufacturers and sells the merchandise to a...
University Wholesale Company purchases merchandise from a variety of manufacturers and sells the merchandise to a variety of retail stores. All sales are subject to a cash discount (terms of 2/10, n/30). University uses a perpetual inventory system. The following transactions occurred during the month of February: Feb. 2—Purchased $18,600 of merchandise from Caroline Manufacturing; terms are 1/10, n/30. Feb. 5—Paid $750 freight bill for the February 2 purchase. Feb. 11—Paid Caroline for the February 2 purchase. Feb. 17—University receives...
TM Office Supplies, Inc., is a wholesale distributor of office supplies. It sells pencils and pens,...
TM Office Supplies, Inc., is a wholesale distributor of office supplies. It sells pencils and pens, paper goods (including computer paper and forms), staplers, calendars, and other items, excluding furniture and other major items such as copy machines that you would expect to find in an office. Sales have been growing at 5 percent per year during the past several years. Mr. Marina, the president of TM Office Supplies, recently attended a national office supplies convention. In conversations during that...
Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products...
Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products approached the company’s bank in late 2019 seeking short-term financing, he was told that money was very tight and that any borrowing over the next year would have to be supported by a detailed statement of cash receipts and disbursements. He was also told that it would be very helpful to the bank if borrowers would indicate the quarters in which they would be...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT