Brabant NV of the Netherlands is a wholesale distributor of Dutch cheeses that it sells throughout the European Community. Unfortunately, the company's profits have been declining, which has caused considerable concern. To help understand the condition of the company, the managing director of the company has requested that the monthly income statement be segmented by sales territory. Accordingly, the company's accounting department has prepared the following statement for March, the most recent month. (The Dutch currency is the euro which is designated by €.)

Cost of goods sold and shipping expenses are both variable; other costs are all fixed. Brabant NV purchases cheeses at auction and from farmers' cooperatives, and it distributes them in the three territories listed above. Each of the three sales territories has its own manager and sales staff. The cheeses vary widely in profitability; some have a high margin and some have a low margin.
(Certain cheeses, after having been aged for long periods, are the most expensive and carry the highest margins.)
Required:
1. List any disadvantages or weaknesses that you see to the statement format illustrated above.
2. Explain the basis that is apparently being used to allocate the corporate expenses to the territories.
Do you agree with these allocations? Explain.
3. Prepare a new segmented contribution format income statement for May. Show a Total column as well as data for each territory. Include percentages on your statement for all columns. Carry percentages to one decimal place.
4. Analyze the statement that you prepared in (3) above. What points that might help to improve the company's performance would you bring to management'sattention?

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Sales Territory Middle Europe Europe Europe 300,000 800,000 700,000 Southern Northerrn Sales ..o..N Territorial expenses (traceable) 240.000 315000 Cost of goods sold Salaries Insurance Advertising. Depreciation... Shipping 315,000 56,000 112,000 14,000 245,000 21,000 32,000 28,000 32,000 42,000 297,000 616,000 756,000 9,000 16,000 240,000 105,000 15,000 Total territorial expenses Territorial income (loss) before corporate expenses 3,000 184,000 (56,000) Corporate expenses: Advertising (general) General administrative 15,000 20,000 35,000 40,000 20,000 60,000 35,000 20,000 55,000 Net operating income (loss).(32,000) 124.000 (111,000) Total corporate expenses…