Question

In: Accounting

If a cost is a common cost of the segments on a segmented income statement, the...

If a cost is a common cost of the segments on a segmented income statement, the cost should:

not be allocated to the segments.
be excluded from the income statement.
be treated as a product cost rather than as a period cost.
be allocated to the segments on the basis of segment sales.

.

Anderson Corporation has two major business segments-North and South. In July, the North business segment had sales revenues of $220,000, variable expenses of $125,000, and traceable fixed expenses of $29,000. During the same month, the South business segment had sales revenues of $890,000, variable expenses of $472,000, and traceable fixed expenses of $169,000. The common fixed expenses totaled $246,000 and were allocated as follows: $123,000 to the North business segment and $123,000 to the South business segment.

The contribution margin of the South business segment is:

Solutions

Expert Solution

Ans If a cost is a common cost of the segments on a segmented income statement, the cost should not be allocated to segment.
Common cost are those cost which cannot be traced to individual department so it cannot be allocated to segments.
Anderson Corporation
Divisional Income Statement
For July
North division South division Total
Sales Revenue $                      220,000.00 $                       890,000.00 $ 1,110,000.00
Variable Expenses $                      125,000.00 $                       472,000.00 $      597,000.00
Contribution Margin=(sales-variable cost) $                        95,000.00 $                       418,000.00 $      513,000.00
Traceable Fixed expenses $                        29,000.00 $                       169,000.00 $      198,000.00
Common Fixed expenses $      246,000.00
Income from operation $                        66,000.00 $                       249,000.00 $        69,000.00
The Contribution Margin of the South business segment is $418000

Related Solutions

Exercise 6-7 Segmented Income Statement [LO6-4] Shannon Company segments its income statement into its North and...
Exercise 6-7 Segmented Income Statement [LO6-4] Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $700,000, 50%, and $56,000, respectively. The North Division’s contribution margin and contribution margin ratio are $217,500 and 75%, respectively. The South Division’s segment margin is $60,000. The company has $84,000 of common fixed expenses that cannot be traced to either division.    Required: Prepare an income statement for Shannon Company...
1 - On a common-sized income statement, 100% is the a.net income b.net cost of goods...
1 - On a common-sized income statement, 100% is the a.net income b.net cost of goods sold c.sales d.gross profit 2- The numerator of the return on total assets is a.net income plus tax expense b.net income plus interest expense c.net income d.net income minus preferred dividends 3- The purpose of an audit is to a.determine whether or not a company is a good investment b.determine whether or not a company complies with corporate social responsibility c.determine whether or not...
Prepare a segmented variable costing (behavioral) income statement for the company in good format.
Price Categories A B C D E Units Sold 4,000 1,000 500 400 400 Unites Purchased 6,000 1,200 1,000 1,000 1,000 Resale Price $4.00 $12.00 $20.00 $45.00 $60.00 Cost $0.50 $4.00 $10.00 $20.00 $20.00 Prepare a segmented variable costing (behavioral) income statement for the company in good format. Prepare a second variable costing statement assuming 90% of all the books in each category purchased were actually sold. Prepare a third variable costing statement assuming that the price is increased by...
Ciena & Associates The following customer segmented quarterly income statement is for Ciena and Associates, a...
Ciena & Associates The following customer segmented quarterly income statement is for Ciena and Associates, a firm that performs legal services Customers                       Koontz                             Davis                   Nello                   Total Sales revenue                  $150,000                        $750,000              $100,000          $1,000,000 Variable costs                 125,000                           600,000               80,000                805,000 Contribution margin       $ 25,000                          $150,000              $ 20,000            $ 195,000 Direct fixed costs            7,500                                  157,500               5,000                  170,000 Allocated fixed costs      3,000                                15,000               2,000                 20,000 Profit...
to create a common size income statement ---- all items on the income statement by -----...
to create a common size income statement ---- all items on the income statement by ----- a) divide; net income b) multiply; total revenue c) multiply; net income d) divide; total revenue
Tennessee Company is geographically segmented into two divisions – East and West. The company’s income statement...
Tennessee Company is geographically segmented into two divisions – East and West. The company’s income statement for the last month is presented below: Total Company Division % of sales West % sales East % sales Sales $8,500,000 $4,675,000 $3,825,000 Variable expenses 3,395,750 1,636,250 1,759,500 Contribution margin $5,104,250 60% $3,038,750 65% $2,065,500 54% Total Fixed expenses 3,825,000 45% 1,912,500 41% 1,912,500 50% Net income $1,279,250 15% $1,126,250 24% $153,000 4% Management is concerned with the reported results, especially the East Division’s...
Shown as follows is a segmented income statement for Drexel-Hall during the current month. Profit Centers...
Shown as follows is a segmented income statement for Drexel-Hall during the current month. Profit Centers Drexel-Hall Store 1 Store 2 Store 3 Dollars % Dollars % Dollars % Dollars % Sales $ 1,800,000 100 % $ 600,000 100 % $ 600,000 100 % $ 600,000 100 % Variable costs 1,080,000 60 372,000 62 378,000 63 330,000 55 Contribution margin $ 720,000 40 % $ 228,000 38 % $ 222,000 37 % $ 270,000 45 % Traceable fixed costs: controllable...
ACG 2071, Inc., owns and operates three stores in the Fort Myers. An income statement (segmented...
ACG 2071, Inc., owns and operates three stores in the Fort Myers. An income statement (segmented absorption costing) for the company for the last quarter is given below: Superior Markets, Inc. Income Statement For the Quarter Ended September 30 Total North Store South Store East Store Sales $ 4,400,000 $ 880,000 $ 1,760,000 $ 1,760,000 Cost of goods sold 2,420,000 525,000 927,000 968,000 Gross margin 1,980,000 355,000 833,000 792,000 Selling and administrative expenses: Selling expenses 845,000 245,400 322,000 277,600 Administrative...
Shown as follows is a segmented income statement for Drexel-Hall during the current month. Profit Centers...
Shown as follows is a segmented income statement for Drexel-Hall during the current month. Profit Centers Drexel-Hall Store 1 Store 2 Store 3 Dollars % Dollars % Dollars % Dollars % Sales $ 1,800,000 100 % $ 600,000 100 % $ 600,000 100 % $ 600,000 100 % Variable costs 1,080,000 60 372,000 62 378,000 63 330,000 55 Contribution margin $ 720,000 40 % $ 228,000 38 % $ 222,000 37 % $ 270,000 45 % Traceable fixed costs: controllable...
The management accountant for Tony's Skateboard Company has prepared the following segmented income statement for each...
The management accountant for Tony's Skateboard Company has prepared the following segmented income statement for each of its three product lines.                                                Jammer         Cruise        Flight       Total       Sales                                $400,000     $250,000    $350,000 $1,000,000       Variable expenses             260,000       150,000      190,000   600,000       Contribution margin          140,000       100,000      160,000   400,000       Other costs                        20,000       30,000      20,000   70,000       Segment margin                120,000         70,000      140,000   330,000       Allocated avoidable costs 30,000       30,000      20,000   80,000       Segment income                 90,000         40,000      120,000   250,000       Allocated corporate costs 50,000      ...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT