Music Teachers, Inc., is an educational association for music teachers that has
ID: 2567770 • Letter: M
Question
Music Teachers, Inc., is an educational association for music teachers that has 20,100 members. The association operates from a central headquarters but has local membership 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 association publishes books and reports and also sponsors professional courses that qualify for continuing professional education credit. The association’s statement of revenues and expenses for the current year is presented below.
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 association. The association has four segments: Membership Division, Magazine Subscriptions Division, Books and Reports Division, and Continuing Education Division. Mike Doyle has been assigned responsibility for preparing the segmented income statement, and he has gathered the following data:
a. The 20,100 members of the association pay dues of $100 per year, of which $20 covers a one-year subscription to the Teachers’ Forum. Other benefits include membership in the association and chapter affiliation. The portion of the dues covering the magazine subscription ($20) should be assigned to the Magazine Subscriptions Division.
b. A total of 4,100 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 $106,000 in advertising revenues.
c. The costs to produce the Teachers’ Forum magazine included $8 per subscription for printing and paper and $4 per subscription for postage and shipping.
d. A total of 28,800 technical reports and professional texts were sold by the Books and Reports Division at an average selling price per unit of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.
e. The association offers a variety of continuing education courses to both members and nonmembers. The one-day courses had a tuition cost of $75 each and were attended by 2,400 students. A total of 1,780 students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.
f. Salary costs and space occupied by division follow:
Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $290,000 in occupancy costs includes $55,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes.
g. Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.
h. General and administrative expenses include costs relating to overall administration of the association as a whole. The company’s corporate staff does some mailing of materials for general administrative purposes.
The expenses that can be traced or assigned to the corporate staff, as well as any other expenses that are not traceable to the segments, will be treated as common costs. It is not necessary to distinguish between variable and fixed costs.
Required:
1. Prepare a segmented income statement for Music Teachers, Inc. This statement should show the segment margin for each division as well as results for the association as a whole.
Music Teachers, Inc.Statement of Revenues and Expenses
For the Year Ended November 30 Revenues $ 3,386,100 Expenses: Salaries 977,000 Personnel costs 244,250 Occupancy costs 290,000 Reimbursement of member costs to local chapters 600,000 Other membership services 550,000 Printing and paper 348,000 Postage and shipping 176,000 Instructors’ fees 78,000 General and administrative 33,000 Total expenses 3,296,250 Excess of revenues over expenses $ 89,850
Explanation / Answer
Calculations:
Music Teachers, Inc Segmented Income Statement Membership Division Magazine Subscriptions Division Books and Reports Division Continuing Education Division Total Revenues 1608000 655600 720000 402500 3386100 Less: Variable expenses Reimbursement of member costs to local chapters 600000 600000 Other membership services 550000 550000 Printing and paper 193600 115200 39200 348000 Postage and shipping 96800 57600 154400 Total variable expenses 1150000 290400 172800 39200 1652400 Contribution Margin 458000 365200 547200 363300 1733700 Less: Fixed expenses Salaries 227000 159000 302000 194000 882000 Personnel costs 56750 39750 75500 48500 220500 Occupancy costs 70500 23500 78500 47000 219500 Instructors' fees 78000 78000 Total fixed expenses 354250 222250 456000 367500 1400000 Segment operating margin 103750 142950 91200 -4200 333700 Less: Corporate expenses Salaries 95000 Personnel costs 23750 Occupancy costs 70500 General and administrative 33000 Postage and shipping 21600 Net Income 89850Related Questions
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