Vulcan Company\'s contribution format income statement for June is as follows Vu

Question

Vulcan Company's contribution format income statement for June is as follows Vulcan Company Income Statement For the Month Ended June 30 Sales Variable expenses Contribution margin Fixed expenses Net operating income 850,000 320,000 530,000 485,000 45,000 Management is disappointed with the company's performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined theollowing a. The company is divided into two sales territories-Northern and Southern. The Northern Territory recorded $500,000 in sales and $285,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory Fixed expenses of $185,000 and $94,500 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories b. The company is the exclusive distributor for two products-Paks and Tibs. Sales of Paks and Tibs totaled $200,000 and $300,000 respectively, in the Northern territory during June. Variable expenses are 27% of the selling price for Paks and 77% for Tibs. Cost records show that $94,000 of the Northern Territory's fixed expenses are traceable to Paks and $60,000 to Tibs, with the remainder common to the two products Required 1-a. Prepare contribution format segmented income statements for the total company broken down between sales territories 1-b. Prepare contribution format segmented income statements for the Northern Territory broken down by product line

Explanation / Answer

Total Company Northern Southern Sales 850000 100.0% 500000 100.0% 350000 100.0% Variable expenses 320000 37.6% 285000 57.0% 35000 10.0% Contribution margin 530000 62.4% 215000 43.0% 315000 90.0% Traceable fixed expenses 279500 32.9% 185000 37.0% 94500 27.0% Territorial segment margin 250500 29.5% 30000 6.0% 220500 63.0% Common fixed expenses 205500 24.2% Net operating income 45000 5.3% Northern Territory Paks Tibs Sales 500000 100.0% 200000 100.0% 300000 100.0% Variable expenses 285000 57.0% 54000 27.0% 231000 77.0% Contribution margin 215000 43.0% 146000 73.0% 69000 23.0% Traceable fixed expenses 154000 30.8% 94000 47.0% 60000 20.0% Product line segment margin 61000 12.2% 52000 26.0% 9000 3.0% Common fixed expenses 31000 6.2% Sales territory segment margin 30000 6.0%

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