Shannon Company segments its income statement into its North and South Divisions

Question

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 $520,000. 60%. and $31,200. respectively. The North Division's contribution margin and contribution margin ratio are $150,000 and 75%, respectively. The South Division's segment margin is $42,000. The company has $62,400 of common fixed expenses that cannot be traced to either division. Required: Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions.

Explanation / Answer

TOTAL COMPANY NORTH SOUTH AMOUNT $ % AMOUNT $ % AMOUNT $ % SALES 520000 100 200000 100 320000 100 VARIABLE EXPENSES 208000 40 50000 25 158000 49.38 CONTRIBUTION MARGIN 312000 60 150000 75 162000 50.62 TRACEBLE FIXED EXPENSES 218400 98400 120000 TERITORIAL SEGMENT MARGIN 93600 51600 42000 COMMON FIXED COST 62400 NET OPERTAING INCOME 31200

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