EXERCISE 68 Segmented Income Statement LO4 Michaels Company

EXERCISE 6-8 Segmented Income Statement [LO4] Michaels Company segments its income statement into its East and West Divisions. The com- pany\'s overall sales, contribution margin ratio, and net operating income are $600,000, 50%, and $50,000, respectively. The West Division\'s contribution margin and contribution margin ratio are $150,000 and 75%, respectively. The East Division\'s segment margin is $70,000. The company has $60,000 of common fixed costs that cannot be traced to either division Required Prepare an income statement for Michaels Company that uses the contribution format and is seg- mented by divisions. In addition, for the company as a whole and for each segment, show each item on the segmented income statements as a percent of sales.

Solution

Divisions Total Company East West Amount % Amount % Amount %   Sales $600,000 100.0% 400000 100.0% $200,000 100.0%   Variable expenses $300,000 50.0% 250,000 62.5% 50,000 25.0%   Contribution margin $300,000 50.0% 150,000 37.5% 150,000 75.0%   Traceable fixed expenses $190,000 31.7% 80,000 20.0% 110,000 55.0%   Territorial segment margin $110,000 18.3% $70,000 17.5% $40,000 20.0%   Common fixed expenses 60,000 10.0%   Net operating income $50,000 8.3%