Jane Baldwin, Anderson Flooring’s accounting intern, has prepared the following

Question

Jane Baldwin, Anderson Flooring’s accounting intern, has prepared the following income statement for the month of June.

In preparing the income statement, Jane was unsure what to do with $72,000 in corporate fixed expenses that cannot be traced to a particular division. Since these costs were incurred to run the business as a whole, and she believed that each division benefited equally, she just allocated half to each division.

(a)

Prepare a segment margin income statement that highlights each division’s contribution to corporate profits. (If the amount is negative then enter with a negative sign preceding the number e.g. -5,125 or parenthesis. e.g. (5,125).)

Residential Commercial Total Sales revenue $ 1,759,000 $ 3,125,200 $ 4,884,200 Variable expenses 1,031,000 2,538,000 3,569,000 Contribution margin 728,000 587,200 1,315,200 Fixed expenses 633,700 618,500 1,252,200 Operating income $ 94,300 $ (31,300 ) $ 63,000

Explanation / Answer

(a)

Residential Commercial Total Sales revenue $1,759,000 $3,125,200 $4,884,200 Variable expenses $1,031,000 $2,538,000 $3,569,000 Contribution margin $728,000 $587,200 $1,315,200 Traceable fixed expenses $597,700 $582,500 $1,180,200 Segment margin $130,300 $4,700 $135,000 Common fixed expenses $72,000 Operating income $63,000

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