Arctic Software Inc. has two product lines. The income statement for the year ended December 31 shows the following:

The products, Num 1 and Num 2, are sold in two territories, North and South, as follows:

The common fixed expenses are traceable to each territory as follows:
North fixed expenses ........................ $ 40,000
South fixed expenses ........................ 60,000
Home office administrative fixed expenses.. 20,000
Total common fixed expenses............. $120,000
The direct expenses of Num 1, $160,000, and of Num 2, $140,000, are not identifiable with either of the two territories.
Required:
1. Prepare income statements for the year, segmented by territory and including a column for the entire company.
2. Why are direct expenses of one type of segment report not direct expenses of another type of segment report?

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Arctic Software Inc Product Line and Company Income Statement For the Year Ended December 31, 2016 Num 1 Num 2 Total $400,000 $600,000 $1,000,000 400,000 $240,000 $360,000 $ 600,000 300,000 $80,000 $220,000 $ 300,000 120,000 180,000 160,000 240,000 160,000 140,000 Less common fixed expenses North South um Num 2 Total sales... $240,000 $160,000 0,000 420,000 $420,000 $580,000