Question

Vulcan Company’s contribution format income statement for June is as follows:

Vulcan Company Income Statement For the Month Ended June 30
Sales	$	800,000
Variable expenses		308,000
Contribution margin		492,000
Fixed expenses		465,000
Net operating income	$	27,000

Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following:

The company is divided into two sales territories—Northern and Southern. The Northern Territory recorded $400,000 in sales and $212,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $140,000 and $92,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories.

The company is the exclusive distributor for two products—Paks and Tibs. Sales of Paks and Tibs totaled $150,000 and $250,000, respectively, in the Northern territory during June. Variable expenses are 23% of the selling price for Paks and 71% for Tibs. Cost records show that $75,000 of the Northern Territory’s fixed expenses are traceable to Paks and $57,500 to Tibs, with the remainder common to the two products.

Required:

1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories.

1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line.

Prepare contribution format segmented income statements for the total company broken down between sales territories. (Round the percentage answers to one decimal place (i.e .1234 should be entered as 12.3).)

	Sales Territory Total Company Northern Southern Amount % Amount % Amount % 0 0.0 0 0.0 0 0.0 0 0.0 $0 0.0 $0 0.0 $0 0.0

Prepare contribution format segmented income statements for the Northern Territory broken down by product line. (Round the percentage answers to one decimal place (i.e .1234 should be entered as 12.3).)

	Product Line Northern Territory Paks Tibs Amount % Amount % Amount % 0 0.0 0 0.0 0 0.0 0 0.0 $0 0.0 $0 0.0 $0 0.0

Answer 1

Income Statement for the company broken down between sales Territories
	Total Company		Northern		Southern
	Amount	%	Amount	%	Amount	%
Sales	$800,000	100.00	$400,000	100.00	$400,000	100.00
Less; variable Expense	$308,000	38.50	$212,000	53.00	$96,000	24.00
Contribution Margin	$492,000	61.50	$188,000	47.00	$304,000	76.00
Less: Traceable Fixed Expense	$232,000	29.00	$140,000	35.00	$92,000	23.00
Territorial Segment margin	$260,000	32.50	$48,000	12.00	$212,000	53.00
Less: Common Fixed expense	$233,000	29.13
Net Operating Income	$27,000	3.38
Income Statement for the Northern   Teriritory Broken down by Product Line
	Total Company		Paks		Tibs
	Amount	%	Amount	%	Amount	%
Sales	$400,000	100.00	$150,000	100.00	$250,000	100.00
Less; variable Expense	$212,000	53.00	$34,500	8.63	$177,500	44.38
Contribution Margin	$188,000	47.00	$115,500	28.88	$72,500	18.13
Less: Traceable Fixed Expense	$140,000	35.00	$75,000	18.75	$57,500	14.38
Territorial Segment margin	$48,000	12.00	$40,500	10.13	$15,000	3.75