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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 company’s first effort at preparing a segmented income statement for May is given below.

Sales Region

West Central East
Sales $ 312,000 $ 797,000 $ 695,000
Regional expenses (traceable):
Cost of goods sold 98,000 237,000 317,000
Advertising 103,000 242,000 243,000
Salaries 58,000 58,000 113,000
Utilities 9,100 15,800 13,800
Depreciation 23,000 33,000 29,000
Shipping expense 18,000 33,000 44,000
Total regional expenses 309,100 618,800 759,800
Regional income (loss) before corporate expenses 2,900 178,200 (64,800 )
Corporate expenses:
Advertising (general) 17,000 42,000 36,000
General administrative expense 21,000 21,000 21,000
Total corporate expenses 38,000 63,000 57,000
Net operating income (loss) $ (35,100 ) $ 115,200 $ (121,800 )

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. (Round percentage answers to 1 decimal place.)

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