Digital 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 segmentreport?

Transcribed Image Text:

Digital Software Inc. Product Line and Company Income Statement For the Year Ended December 31, 2013 Num 1 Num 2 Total Sales. ..$400,000 160,000 400,000 Product Less common fixed expenses.... Net income 120,000 S 180,000 North South $240,000 $160,000 180,000 420,000 $420,000 $580,000 Num 1...