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 $600,000, 50%, and $50,000, respectively. The North Division’s contribution margin and contribution margin ratio are $150,000 and 75%, respectively. The South Division’s segment margin is $70,000. The company has $60,000 of common fixed expenses that cannot be traced to either division.

Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3))

Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3))

Explanation / Answer

Divisions Total Company North South Amount $ % Amount $ % Amount $ % Sales                    6,00,000 100%     2,00,000 100% 4,00,000 100% Variable expenses                    3,00,000 50%        50,000 25% 2,50,000 63% Contribution margin                    3,00,000 50%     1,50,000 75% 1,50,000 38% Traceable fixed expenses                    1,90,000     1,10,000     80,000 Territorial segment margin                    1,10,000 18%        40,000 20%     70,000 18% Common fixed expenses                       60,000 Net operating income                               50,000 8%

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