Red Deer Sporting Goods is a retailer of sporting equipment. Last year, Red Deer Sporting Goods’ sales revenues totalled $6,400,000. Total expenses were $2,800,000. Of this amount, approximately $1,792,000 were variable, while the remainder were fixed. Since Red Deer Sporting Goods offers thousands of different products, its managers prefer to calculate the break-even point in terms of sales dollars, rather than units.
Assume that Red Deer Sporting Goods gathers information on the sales of their products based on two departments: Winter Sports and Summer Sports. Winter Sports revenues total $4,000,000 of the total $6,400,000 and the department has an average contribution margin of 75%, while Summer Sports brings in the remaining revenues and has a contribution margin of 67%. Of the fixed costs, $550,000 can be directly traced to Winter Sports and $400,000 can be traced to Summer Sports. Prepare a segmented contribution margin income statement for Red Deer Sporting Goods.