The most recent monthly contribution format income statement for Reston Company

Question

The most recent monthly contribution format income statement for Reston Company is given below: 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-Central and Eastern. The Central Territory recorded $400,000 in sales and $180,000 in variable expenses during May. The remaining sales and variable expenses were recorded in the Eastern Territory. Fixed expenses of $216,000 and $135,000 are traceable to the Central and Eastern Territories, respectively. The rest of the fixed expenses are common to the two territories. The company is the exclusive distributor for two products-Awls and Pows. Sales of Awls and Pows totaled $200,000 and $200,000, respectively, in the Central Territory during May. Variable expenses are 26% of the selling price for Awls and 64% for Pows. Cost records show that $92,000 of the Central Territory's fixed expenses are traceable to Awls and $42,000 to Pows, with the remainder common to the two products. Prepare contribution format segmented income statements for the total company broken down between sales territories. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.) Prepare contribution format segmented income statements for the Central Territory broken down by product line. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the $" and "%" signs in your response.)

Explanation / Answer

Answer:1a

Answer:1b

Sales Territory Total company Central Eastern Particulars Amount % Amount % Amount % Sales 900000 100 400000 100 500000 100 Less: Variable expenses 400000 44.44444 180000 45 220000 44 Contribution margin 500000 55.55556 220000 55 280000 56 Traceable fixed expenses 351000 39 216000 54 135000 27 Product line segment margin 149000 16.55556 4000 1 145000 29 Common fixed expenses 119000 13.22222 Sales territory segment margin 30000 3.333333

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