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?

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