Case 6-30 Service Organization; Segment Reporting [LO6-4] Music Teachers, Inc.,

Question

Case 6-30 Service Organization; Segment Reporting [LO6-4] Music Teachers, Inc., Is an educational assoclation for music teachers that has 19,900 members. The assoclation operates from a central headquarters but has local membershlp chapters throughout the United States. Monthly meetings are held by the local chapters to discuss recent developments on topics of Interest to music teachers. The association's magazine, Teachers' Forum, IS Issued monthly with features about recent developments In the field. The assoclation publishes books and reports and also sponsors professional courses that quallfy for continulng professional education credit. The assoclation's statement of revenues and expenses for the current year is presented below. Music Teachers, Inc Statement of Revenues and Expenses For the Year Ended November 38 Revenues $3,354,488 Expenses: Salaries Personnel costs Occupancy costs Reimbursement of member costs to local chapters Other membership services Printing and paper Postage and shipping Instructors fees General and administrative 974,888 243,5e8 284,800 588,888 57e,888 336,808 191,808 79,888 31,888 3,288,588 $ 65,9e8 Total expenses Excess of revenues over expenses The board of directors of Music Teachers, Inc., has requested that a segmented Income statement be prepared showing the contribution of each segment to the assoclation. The assoclation has four segments: Membership Division, Magazine Subscriptions Division, Books and Reports DIvision, and Continulng Education Division. Mike Doyle has been assigned responsibilty for preparing the segmented Income statement, and he has gathered the following data: a. The 19,900 members of the assoclation pay dues of $100 per year, of which $20 covers a one-year subscription to the Teachers Forum. Other benefits Include membership In the assoclation and chapter affillation. The portion of the dues covering the magazine subscription ($20) should be assigned to the Magazine Subscriptions DIvIsion. b. A total of 3,400 one-year subscriptions to Teachers' Forum were also sold last year to nonmembers and libraries at $36 per subscription. In addition to subscriptions, the Journal generated $112,000 In advertising revenues. C. The costs to produce the Teachers' Forum magazine Included $7 per subscription for printing and paper and $4 per subscription for postage and shlpping

Explanation / Answer

  

SEGMENTS Ref Membership Magazine Books & reports Continuing education Common Costs Total REVENUE a Membership dues $    1,592,000 $            398,000 $        1,990,000 (19900*100) b Subscription from non members for magazine $            122,400 $            122,400 (3400*36) b Advertising revenues $112,000 $112,000 d Sales of Technical reports $        700,000 $700,000 (28000*25) e Tuition fees for one day couse $        195,000 $            195,000 (2600*75) e Tuition fees for two days couse $        235,000 $            235,000 (1880*125) TOTAL $    1,592,000 $            632,400 $        700,000 $        430,000 $        3,354,400 EXPENSES: c Prining & paper cost for magazine $            163,100 $            163,100 (7*(19900+3400) c Postage and shipping for magazine $              93,200 $              93,200 (4*(19900+3400) d Prining & paper cost for technical report $112,000 $            112,000 (4*28000) d Postage and shipping for technical report $56,000 $              56,000 (2*28000) e Instructor fees $79,000 $              79,000 f Salaries Costs $218,000 $155,000 $320,000 $192,000 $89,000 $            974,000 f Personnel costs $54,500 $38,750 $80,000 $48,000 $22,250 $            243,500 f Occupancy cost $          68,700 $              22,900 $          77,900 $          45,800 $          68,700 $            284,000 55000 for Books & reports. Balance 229000allocated based on space occupied g Printing & paper $          60,900 $              60,900 (336000-163100-112000) h Other membership services $570,000 $            570,000 h General Administrative expenses $31,000 $              31,000 h Reimbursement of member cost to local chapters $580,000 $            580,000 h Postage and shipping $41,800 $              41,800 (191000-93200-56000) TOTAL EXPENSES $    1,491,200 $            472,950 $        645,900 $        425,700 $        252,750 $        3,288,500 Music teachers Inc Segmented Income Statement For the year ended November30 DIVISION Association Magazine Books & Continuing Total Membership Subscription Reports Education Sales Membership dues $    1,990,000 $        1,592,000 $        398,000 Subscription from non members for magazine $        122,400 $        122,400 Advertising revenues $        112,000 $112,000 Sales of Technical reports $        700,000 $        700,000 Tuition fees for one day couse $        195,000 $        195,000 Tuition fees for two days couse $        235,000 $        235,000 Total Revenue $    3,354,400 $        1,592,000 $        632,400 $        700,000 $        430,000 EXPENSES TRACEABLE TO SEGMENTS Prining & paper cost for magazine $        163,100 $        163,100 Postage and shipping for magazine $          93,200 $          93,200 Prining & paper cost for technical report $        112,000 $112,000 Postage and shipping for technical report $          56,000 $56,000 Instructor fees $          79,000 $79,000 Salaries Costs $        885,000 $218,000 $155,000 $320,000 $192,000 Personnel costs $        221,250 $54,500 $38,750 $80,000 $48,000 Occupancy cost $        215,300 $              68,700 $          22,900 $          77,900 $          45,800 Printing & paper $          60,900 $          60,900 Other membership services $        570,000 $570,000 General Administrative expenses $                    -   Reimbursement of member cost to local chapters $        580,000 $580,000 Postage and shipping $                    -   Total Traceable expenses $    3,035,750 $        1,491,200 $        472,950 $        645,900 $        425,700 SEGMENTAL CONTRIBUTION(REVENUE MINUS EXPENSES) $        318,650 $            100,800 $        159,450 $          54,100 $            4,300 COMMON EXPENSES NOT TRACEABLE TO DIVISIONS Salaries Costs $89,000 Personnel costs $22,250 Occupancy cost $          68,700 General Administrative expenses $          31,000 Postage and shipping $41,800 TOTAL COMMON EXPENSES $252,750

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