Music Teachers, Inc., is an educational association for music teachers that has
ID: 2601832 • Letter: M
Question
Music Teachers, Inc., is an educational association for music teachers that has 19,900 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 journal, 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 prior to its preparation.
Membership dues are $100 per year, of which $20 is considered to cover a one-year subscription to the association’s journal. 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 Subscription Division.
One-year subscriptions to Teachers’ Forum were sold to nonmembers and libraries at $38 per subscription. A total of 3,600 of these subscriptions were sold last year. In addition to subscriptions, the magazine generated $117,000 in advertising revenues. The costs per magazine subscription were $8 for printing and paper and $4 for postage and shipping.
A total of 28,200 technical reports and professional texts were sold by the Books and Reports Division at an average unit selling price of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.
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 2,500 students. A total of 1,820 students took two-day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.
Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The $296,000 in occupancy costs includes $53,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes.
Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.
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.
Music Teachers, Inc.Statement of Revenues and Expenses
For the Year Ended November 30 Revenues $ 3,363,800 Expenses: Salaries 962,000 Personnel costs 240,500 Occupancy costs 296,000 Reimbursement of member costs to local chapters 520,000 Other membership services 540,000 Printing and paper 354,000 Postage and shipping 227,000 Instructors’ fees 77,000 General and administrative 33,000 Total expenses 3,249,500 Excess of revenues over expenses $ 114,300 1. Prepare a contribution format 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 Division Association Magazine Books & Continuing Total Membership Subscriptions Reports Education Sales Membership dues Non-member journal subscriptions lotal revenues Expenses traceable to segments Total traceable expenses Common expenses not traceable to divisions lotal common expenses
Explanation / Answer
workings:
Association Total Membership Magazine Subscription Books &Reports Continuing education Sales Member ship dues 1,990,000 1,592,000 398,000 Teacher forum subscriptions 136,800 136,800 Magazine advertisement revenue 117,000 117,000 Technical report and texts sale 705,000 705,000 One day courses 415,000 415,000 Total revenues 3,363,800 1,592,000 651,800 705,000 415,000 Expenses traceble to segments Salaries 868,000 228,000 154,000 300,000 186,000 Personnel costs 217,000 57,000 38,500 75,000 46,500 Occupancy costs 223,100 72,900 24,300 77,300 48,600 Printing and paper 354,000 28,800 112,800 212,400 Reimbursement of member costs 520,000 520,000 Other membership services 540,000 540,000 Postage and shipping 70,800 14,400 56,400 Instructor fee 77,000 77,000 Total traceble expenses 2,869,900 1,417,900 260,000 621,500 570,500 Contribution 493,900 174,100 391,800 83,500 (155,500) Common expenses not traceble to divisions Corporate staff salaries 94,000 Corporate staff personnel costs 23,500 occupancy costs 72,900 General and administrative 33,000 Corporate postage and shipping 156,200 Total common expenses 379,600 Net profit 114,300Related Questions
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