11 Sprint 100 343 PM eztomheducationcom value 200 points Sh

\'11 Sprint * 100% 3:43 PM ezto.mheducation.com value 2.00 points Shannon Company segments its income statement into its North and South Divisions. The company\'s overall sales, contribution margin ratio, and net operating income are $760,000, 60%, and $45,600, respectively. The North Division\'s contribution margin and contribution margin ratio are $240,000 and 75%, respectively. The South Division\'s segment margin is $66,000. The company has $91,200 of common fixed expenses that cannot be traced to either division. Required: Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3)) Total Company North South Amount Amount Amount

Solution

Answer

Total Company

Divisions

North

South

$

%

$

%

$

%

Sales

   760,000.00

100.00%

   320,000.00

100.00%

   440,000.00

100.00%

Variable cost

   304,000.00

40.00%

     80,000.00

25.00%

   224,000.00

50.91%

Contribution Margin

   456,000.00

60.00%

   240,000.00

75.00%

   216,000.00

75.00%

Traceable Fixed Expense

   319,200.00

42.00%

   169,200.00

52.88%

   150,000.00

34.09%

Segment Margin

   136,800.00

18.00%

     70,800.00

22.13%

     66,000.00

15.00%

Common Fixed Expenses

     91,200.00

12.00%

Net Operating Income

     45,600.00

6.00%

Let’s Solve Total Company First

In segment we calculate the percentage to sales, so if Contribution Margin is 60%, then it means it is 60% of sales.

Sales is 760,000 and Contribution margin is 60% of sales, so the remaining must be the Variable cost.

We have Net operating income and Common Fixed Expenses, so we can calculate Total Segment margin of company by adding it.

Now we have segment margin and we had already have Contribution Margin, so the difference must be Traceable fixed cost.

Now the Total company calculation is complete.

Let’s Solve North

Contribution Margin is 240,000 and is 75% that means Sales will be (240,000 / 75%) and Variable cost will be (240,000 / 25%)

Now we know the Total Segment margin and South segment margin, we can calculate North segment margin.

Now with North segment margin and Contribution Margi we can calculate North’s share in Traceable Fixed Cost.

Now the North calculation is complete.

Let’s Solve South

We have Segment margin of South and from North Traceable Fixed Cost share we can calculate South Share.

With South Traceable Fixed Cost Share and Segment Margin, we can calculate Contribution Margin of South.

We have total sale and Variable cost and we have north sale and variable cost, now we can calculate South Sales and variable cost.

Now the South calculation is complete.

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	Total Company	Divisions
North	South
$	%	$	%	$	%
Sales	760,000.00	100.00%	320,000.00	100.00%	440,000.00	100.00%
Variable cost	304,000.00	40.00%	80,000.00	25.00%	224,000.00	50.91%
Contribution Margin	456,000.00	60.00%	240,000.00	75.00%	216,000.00	75.00%
Traceable Fixed Expense	319,200.00	42.00%	169,200.00	52.88%	150,000.00	34.09%
Segment Margin	136,800.00	18.00%	70,800.00	22.13%	66,000.00	15.00%
Common Fixed Expenses	91,200.00	12.00%
Net Operating Income	45,600.00	6.00%