Drenthe BV of the Netherlands is a wholesale distributor of Dutch cheeses that i
ID: 2566175 • Letter: D
Question
Drenthe BV of the Netherlands is a wholesale distributor of Dutch cheeses that it sells throughout the European Community. Unfortunately, the company’s profits have been declining, which has caused considerable concern. To help understand the condition of the company, the managing director of the company has requested that the monthly income statement be segmented by sales territory. Accordingly, the company’s accounting department has prepared the following statement for March, the most recent month. (The Dutch currency is the euro which is designated by €.)
Sales Territory
Cost of goods sold and shipping expenses are both variable; other costs are all fixed. Drenthe BV purchases cheeses at auction and from farmers’ cooperatives, and it distributes them in the three territories listed above. Each of the three sales territories has its own manager and sales staff. The cheeses vary widely in profitability; some have a high margin and some have a low margin. (Certain cheeses, after having been aged for long periods, are the most expensive and carry the highest margins.)
Prepare a new segmented contribution format income statement for May. Show a Total column as well as data for each territory. In addition, for the company as a whole and for each sales territory, show each item on the segmented income statement as a percent of sales. (Note: % columns may not total due to rounding.) (Round percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3).)
Drenthe BV of the Netherlands is a wholesale distributor of Dutch cheeses that it sells throughout the European Community. Unfortunately, the company’s profits have been declining, which has caused considerable concern. To help understand the condition of the company, the managing director of the company has requested that the monthly income statement be segmented by sales territory. Accordingly, the company’s accounting department has prepared the following statement for March, the most recent month. (The Dutch currency is the euro which is designated by €.)
Explanation / Answer
Note: Corporate expenses are shown in the total column only as these relate to the company as a whole.
DRENTHE BV Segmented Income Statement (Contribution Fromat) Item Southern Eurpoe Middle Europe Northern Eurpoe Company Value % Value % Value % Value % Sales 359000 100% 884000 100% 718000 100% 1961000 100% Variable costs Cost of Goods Sold 110000 30.64% 280000 31.67% 315000 43.87% 705000 35.95% Shipping Expenses 17000 4.74% 38000 4.30% 43000 5.99% 98000 5.00% Total Territorial Variable costs 127000 35.38% 318000 35.97% 358000 49.86% 803000 40.95% Territorial Contribution Margin 232000 64.62% 566000 64.03% 360000 50.14% 1158000 59.05% Fixed Costs Salaries 61000 16.99% 54000 6.11% 107000 14.90% 222000 11.32% Insurance 12700 3.54% 16400 1.86% 13900 1.94% 43000 2.19% Advertising 115000 32.03% 243000 27.49% 244000 33.98% 602000 30.70% Depreciation 25000 6.96% 34000 3.85% 31000 4.32% 90000 4.59% Total Territorial Fixed Costs 213700 59.53% 347400 39.30% 395900 55.14% 957000 48.80% Territorial Income/(loss) 18300 5.10% 218600 24.73% -35900 -5.00% 201000 10.25% before corporate expenses Corporate expenses Advertising expenses 108000 5.51% General Administration 80400 4.10% Total corporate expenses 188400 9.61% Net operating income / (loss) 12600 0.64%Related Questions
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