Shoe Shock Innovations manufactures athletic shoe inserts that cushion the foot
ID: 2462722 • Letter: S
Question
Shoe Shock Innovations manufactures athletic shoe inserts that cushion the foot and reduce the impact of exercise on the joints. The company has two divisions, Sole Inserts and Heel Inserts. A segmented income statement from last month follows. Sole Inserts Division Heel Inserts Division Total Shoe Shock Revenue $491,300 $2,549,000 $3,040,300 Less variable expenses 311,000 2,011,000 2,322,000 Contribution margin 180,300 538,000 718,300 Less traceable fixed expenses 123,500 348,100 471,600 Segment margin $56,800 $189,900 246,700 Common fixed costs 173,800 Net operating income $72,900 Chris Kelly is Shoe Shock’s sales manager. Although this statement provides useful information, Chris wants to know how well the company’s two distribution channels, specialty footwear stores and drug stores, are performing. Marketing data indicates that 20% of sole inserts and 75% of heel inserts are sold through specialty footwear stores. A recent analysis of corporate fixed costs revealed that 50% of all fixed costs are traceable to specialty footwear stores and 45% of all fixed costs to drug stores.
Prepare a segment margin income statement for Shoe Shock’s two distribution channels.
Explanation / Answer
Speciality Footwear
Drugstore
Total
Sole insert (20%)
Heel insert (75%)
Total
Sole insert (80%)
Heel insert (25%)
Total
Revenue
98260
1911750
2010010
393040
637250
1030290
3040300
Variable expenses
-62200
-1508250
-1570450
-248800
-502750
-751550
-2322000
Contribution margin
36060
403500
439560
144240
134500
278740
718300
Fixed cost traceable(50%, 45%)
-322700
-290430
-645400
Fixed cost common(5%)
-32270
Net operating margin
116860
-11690
72900
Speciality Footwear
Drugstore
Total
Sole insert (20%)
Heel insert (75%)
Total
Sole insert (80%)
Heel insert (25%)
Total
Revenue
98260
1911750
2010010
393040
637250
1030290
3040300
Variable expenses
-62200
-1508250
-1570450
-248800
-502750
-751550
-2322000
Contribution margin
36060
403500
439560
144240
134500
278740
718300
Fixed cost traceable(50%, 45%)
-322700
-290430
-645400
Fixed cost common(5%)
-32270
Net operating margin
116860
-11690
72900
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.