Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes

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Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff.

The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The company’s first effort at preparing a segmented income statement for May is given below.

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The cost of goods sold and shipping expense are both variable. All other costs are fixed.
Required:
1. List any weaknesses that you see in the company’s segmented income statement given above.
2. Explain the basis that is apparently being used to allocate the corporate expenses to the regions. Do you agree with these allocations? Explain.
3. Prepare a new contribution format segmented income statement for May. Show a Total column as well as data for each region. In addition, for the company as a whole and for each sales region, show each item on the segmented income statement as a percent of sales.
4. Analyze the statement that you prepared in part (3) above. What insights do those statements reveal that you would bring to management’s attention?

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Related Book For  book-img-for-question

ISE Introduction To Managerial Accounting

ISBN: 9781260091755

8th Edition

Authors: Peter Brewer, Ray Garrison, Eric Noreen

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