Question

Music Teachers, Inc., is an educational association for music teachers that has 19,900 members. The association operates from a central headquarters but has local membership chapters throughout the United States. Monthly meetings are held by the local chapters to discuss recent developments on topics of interest to music teachers. The association’s magazine, Teachers’ Forum, is issued monthly with features about recent developments in the field. The association publishes books and reports and also sponsors professional courses that qualify for continuing professional education credit. The association’s statement of revenues and expenses for the current year is presented below.

Music Teachers, Inc. Statement of Revenues and Expenses For the Year Ended November 30
Revenues	$	3,300,500
Expenses:
Salaries		966,000
Personnel costs		241,500
Occupancy costs		220,000
Reimbursement of member costs to local chapters		560,000
Other membership services		540,000
Printing and paper		315,000
Postage and shipping		156,000
Instructors’ fees		71,000
General and administrative		33,000
Total expenses		3,102,500
Excess of revenues over expenses	$	198,000

The board of directors of Music Teachers, Inc., has requested that a segmented income statement be prepared showing the contribution of each segment to the association. The association has four segments: Membership Division, Magazine Subscriptions Division, Books and Reports Division, and Continuing Education Division. Mike Doyle has been assigned responsibility for preparing the segmented income statement, and he has gathered the following data:

a. The 19,900 members of the association pay dues of $100 per year, of which $20 covers a one-year subscription to the Teachers’ Forum. Other benefits include membership in the association and chapter affiliation. The portion of the dues covering the magazine subscription ($20) should be assigned to the Magazine Subscriptions Division.

b. A total of 2,500 one-year subscriptions to Teachers’ Forum were also sold last year to nonmembers and libraries at $30 per subscription. In addition to subscriptions, the journal generated $113,000 in advertising revenues.

c. The costs to produce the Teachers’ Forum magazine included $8 per subscription for printing and paper and $4 per subscription for postage and shipping.

d. A total of 28,600 technical reports and professional texts were sold by the Books and Reports Division at an average selling price per unit of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.

e. The association offers a variety of continuing education courses to both members and nonmembers. The one-day courses had a tuition cost of $75 each and were attended by 2,500 students. A total of 1,760 students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.

f. Salary costs and space occupied by division follow:

	Salaries			Space Occupied (square feet)
Membership	$	228,000		3,000
Magazine Subscriptions		152,000		1,000
Books and Reports		304,000		1,000
Continuing Education		185,000		2,000
Corporate staff		97,000		3,000
Total	$	966,000		10,000

Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $220,000 in occupancy costs includes $55,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes. Assume that this cost could be avoided if the division were eliminated.

g. Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.

h. General and administrative expenses include costs relating to overall administration of the association as a whole. The company’s corporate staff does some mailing of materials for general administrative purposes.

The expenses that can be traced or assigned to the corporate staff, as well as any other expenses that are not traceable to the segments, will be treated as common costs. It is not necessary to distinguish between variable and fixed costs.

Required:

1. Prepare a segmented income statement for Music Teachers, Inc. This statement should show the segment margin for each division as well as results for the association as a whole.

Music Teachers, Inc., is an educational association for music teachers that has 19,900 members. The association operates from a central headquarters but has local membership chapters throughout the United States. Monthly meetings are held by the local chapters to discuss recent developments on topics of interest to music teachers. The association’s magazine, Teachers’ Forum, is issued monthly with features about recent developments in the field. The association publishes books and reports and also sponsors professional courses that qualify for continuing professional education credit. The association’s statement of revenues and expenses for the current year is presented below.

Music Teachers, Inc. Statement of Revenues and Expenses For the Year Ended November 30
Revenues	$	3,300,500
Expenses:
Salaries		966,000
Personnel costs		241,500
Occupancy costs		220,000
Reimbursement of member costs to local chapters		560,000
Other membership services		540,000
Printing and paper		315,000
Postage and shipping		156,000
Instructors’ fees		71,000
General and administrative		33,000
Total expenses		3,102,500
Excess of revenues over expenses	$	198,000

The board of directors of Music Teachers, Inc., has requested that a segmented income statement be prepared showing the contribution of each segment to the association. The association has four segments: Membership Division, Magazine Subscriptions Division, Books and Reports Division, and Continuing Education Division. Mike Doyle has been assigned responsibility for preparing the segmented income statement, and he has gathered the following data:

a. The 19,900 members of the association pay dues of $100 per year, of which $20 covers a one-year subscription to the Teachers’ Forum. Other benefits include membership in the association and chapter affiliation. The portion of the dues covering the magazine subscription ($20) should be assigned to the Magazine Subscriptions Division.

b. A total of 2,500 one-year subscriptions to Teachers’ Forum were also sold last year to nonmembers and libraries at $30 per subscription. In addition to subscriptions, the journal generated $113,000 in advertising revenues.

c. The costs to produce the Teachers’ Forum magazine included $8 per subscription for printing and paper and $4 per subscription for postage and shipping.

d. A total of 28,600 technical reports and professional texts were sold by the Books and Reports Division at an average selling price per unit of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.

e. The association offers a variety of continuing education courses to both members and nonmembers. The one-day courses had a tuition cost of $75 each and were attended by 2,500 students. A total of 1,760 students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.

f. Salary costs and space occupied by division follow:

	Salaries			Space Occupied (square feet)
Membership	$	228,000		3,000
Magazine Subscriptions		152,000		1,000
Books and Reports		304,000		1,000
Continuing Education		185,000		2,000
Corporate staff		97,000		3,000
Total	$	966,000		10,000

Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $220,000 in occupancy costs includes $55,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes. Assume that this cost could be avoided if the division were eliminated.

g. Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.

h. General and administrative expenses include costs relating to overall administration of the association as a whole. The company’s corporate staff does some mailing of materials for general administrative purposes.

The expenses that can be traced or assigned to the corporate staff, as well as any other expenses that are not traceable to the segments, will be treated as common costs. It is not necessary to distinguish between variable and fixed costs.

Required:

1. Prepare a segmented income statement for Music Teachers, Inc. This statement should show the segment margin for each division as well as results for the association as a whole.

Music Teachers, Inc., is an educational association for music teachers that has 19,900 members. The association operates from a central headquarters but has local membership chapters throughout the United States. Monthly meetings are held by the local chapters to discuss recent developments on topics of interest to music teachers. The association’s magazine, Teachers’ Forum, is issued monthly with features about recent developments in the field. The association publishes books and reports and also sponsors professional courses that qualify for continuing professional education credit. The association’s statement of revenues and expenses for the current year is presented below.

Music Teachers, Inc. Statement of Revenues and Expenses For the Year Ended November 30
Revenues	$	3,300,500
Expenses:
Salaries		966,000
Personnel costs		241,500
Occupancy costs		220,000
Reimbursement of member costs to local chapters		560,000
Other membership services		540,000
Printing and paper		315,000
Postage and shipping		156,000
Instructors’ fees		71,000
General and administrative		33,000
Total expenses		3,102,500
Excess of revenues over expenses	$	198,000

The board of directors of Music Teachers, Inc., has requested that a segmented income statement be prepared showing the contribution of each segment to the association. The association has four segments: Membership Division, Magazine Subscriptions Division, Books and Reports Division, and Continuing Education Division. Mike Doyle has been assigned responsibility for preparing the segmented income statement, and he has gathered the following data:

a. The 19,900 members of the association pay dues of $100 per year, of which $20 covers a one-year subscription to the Teachers’ Forum. Other benefits include membership in the association and chapter affiliation. The portion of the dues covering the magazine subscription ($20) should be assigned to the Magazine Subscriptions Division.

b. A total of 2,500 one-year subscriptions to Teachers’ Forum were also sold last year to nonmembers and libraries at $30 per subscription. In addition to subscriptions, the journal generated $113,000 in advertising revenues.

c. The costs to produce the Teachers’ Forum magazine included $8 per subscription for printing and paper and $4 per subscription for postage and shipping.

d. A total of 28,600 technical reports and professional texts were sold by the Books and Reports Division at an average selling price per unit of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.

e. The association offers a variety of continuing education courses to both members and nonmembers. The one-day courses had a tuition cost of $75 each and were attended by 2,500 students. A total of 1,760 students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.

f. Salary costs and space occupied by division follow:

	Salaries			Space Occupied (square feet)
Membership	$	228,000		3,000
Magazine Subscriptions		152,000		1,000
Books and Reports		304,000		1,000
Continuing Education		185,000		2,000
Corporate staff		97,000		3,000
Total	$	966,000		10,000

Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $220,000 in occupancy costs includes $55,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes. Assume that this cost could be avoided if the division were eliminated.

g. Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.

h. General and administrative expenses include costs relating to overall administration of the association as a whole. The company’s corporate staff does some mailing of materials for general administrative purposes.

The expenses that can be traced or assigned to the corporate staff, as well as any other expenses that are not traceable to the segments, will be treated as common costs. It is not necessary to distinguish between variable and fixed costs.

Required:

1. Prepare a segmented income statement for Music Teachers, Inc. This statement should show the segment margin for each division as well as results for the association as a whole.

Answer 1

Particulars	Total	Membership	Magazine	Books and Reports	Continuing Education
Revenue:
Membership Due (working-1)	1990000	1592000	398000
Non Member (2500*30)	75000		75000
Advertising	113000		113000
Reports & Texts 28600*25	715000			715000
Continuing Education(3300500-Other)	407500				407500
Total Revenue (Given in Question)	3300500	1592000	586000	715000	407500
Expenses tracable to Segment:
Salaries (working-2)	869000	228000	152000	304000	185000
Personnel Cost (working-2)	217250	57000	38000	76000	46250
Occupancy Cost (working-3)	170500	49500	16500	71500	33000
Reimbursment of members cost to local	560000	560000
Other membership Service	540000	540000
Printing and Paper (Working-4)	315000		179200	114400	21400
Postage and Shipping (working-4)	146800		89600	57200
Instructors Fee	71000				71000
Total Traceable Expenses	2889550	1434500	475300	623100	356650
Division Segment Margin	410950	157500	110700	91900	50850
Common Expenses NOT tracable to Segment:
Salaries (working-2)-Corporate Staff	97000
Personnel Cost (working-2)-Corporate Staff	24250
Occupancy Cost (working-3)-Corporate Staff	49500
Postage and Shipping (working-4)-Corporate Staff	9200
General Admin exp	33000
Common Expenses NOT tracable to Segment:	212950
Excess of revenues over expense (Margin- Untraceable Exp)	198000

Working-1	Revenue	Membership	Magazine	Total
	Total Member			19900
	Per Unit Price	80	20	100
	Total Revenue	1592000	398000	1990000
Working-2	Salary and Personnel Cost
		Salary	Personnel Cost
			25% of Salary
	Membership	228000	57000
	Magazine Subs	152000	38000
	Books and Reports	304000	76000
	Continuing Education	185000	46250
	Corporate Staff	97000	24250
		966000	241500
Working-3	Occupancy Cost		165000
		Space	Allocation based on Space (220000-55000)=165000	Direct Allocation (55000)	Total
	Membership	3000	49500		49500
	Magazine Subs	1000	16500		16500
	Books and Reports	1000	16500	55000	71500
	Continuing Education	2000	33000		33000
	Corporate Staff	3000	49500		49500
		10000	165000	55000	220000
Working-4	Printing and Paper
			Per Unit	Total Paper	Per Unit Postage	Total Postage
	Membership
	Magazine Subs	22400	8	179200	4	89600
	Books and Reports	28600	4	114400	2	57200
	Continuing Education (Total-books-Subs)			21400
	Corporate Staff (Total-books-Subs)					9200
				315000		156000