Vulcan Company\'s contribution format income statement for June is given below V

Question

Vulcan Company's contribution format income statement for June is given below Vulcan Company Income Statement For the Month Ended June 30 Sales Variable expenses S 850,000 320,000 Contribution margin Fixed expenses 530,000 485,000 Net operating income $ 45,000 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 a. The company is divided into two sales territories-Northem and Southern. The Northen Territory recorded $500,000 in sales and $285,000 in variable expenses during June, the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $185,000 and $94,500 are traceable to the Northern and Southern Territories, respectively The rest of the fixed expenses are common to the two territories b. The company is the exclusive distributor for two products-Paks and Tibs Sales of Paks and Tibs totaled $200,000 and $300,000, respectively, in the Northern territory during June. Variable expenses are 27% of the selling price for Paks and 77% for Tibs Cost records show that $94,000 of the Northern Territory's fixed expenses are traceable to Paks and $60,000 to Tibs, with the remainder common to the two products

Explanation / Answer

Income Statement Ans 1 total company Northern Southern Amount % Amount % Amount % sales $850,000 100 $500,000 58.8 $350,000 41.2 % of respective line items Variable Expenses $320,000 100 285000 89.1 $35,000 10.9 Contribution $530,000 100 $215,000 40.6 $315,000 59.4 Fixed Expenses-Traceable $279,500 100 185000 66.2 94500 33.8 Segment Profit $250,500 100 $30,000 12.0 $220,500 88.0 Fixed Expenses-common $205,500 24.2 % of total sales Net Income $45,000 5.3 % of total sales Ans 2 Northern Territory Paks tabs Amount % Amount % Amount % sales $500,000 100 $200,000 40.0 $300,000 60.0 % of respective line items Variable Expenses $285,000.00 100 $54,000.00 18.9 $231,000 81.1 Contribution $215,000.00 100 $146,000 67.9 $69,000 32.1 Fixed Expenses-Traceable $154,000.00 100 94000 61.0 60000 39.0 Product Line Profit $61,000 100 $52,000 85.2 $9,000 14.8 Fixed Expenses-common $31,000 6.2 % of total sales Net Income $30,000 6.0 % of total sales

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