Clean-It Inc. manufactures two products, brooms and mops, which are sold in two territories designated by the company as East Territory and West Territory. The following income statement prepared for the company shows the product-line segments.

The territorial product sales are as follows:

The direct fixed costs of brooms ($50,000) and mops ($150,000) are not identifiable with either of the two territories. The common fixed costs are partially identifiable with East Territory, West Territory, and the general administration as follows:
East Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,000
West Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000
General administration . . . . . . . . . . . . . . . . . . . . . . .. 30,000
Total common fixed costs . . . . . . . . . . . . . . . . .....$120,000

Required:
1. Prepare a segmented income statement by territories. The direct fixed costs of the product lines should be treated as common fixed costs on the segmented statement being prepared.
2. What is the significance of this analysis?

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Clean-It Inc. Income Statement Total Brooms Mops Sales $1,000,000 S600.000 100% $400,000 100% 600,000 42000080,0005 Contribution margin $400,000 s180,000 Less direct fixed costs...200,000 50,000 Segment margin.. 200,000 $130,000 Less common fixed costs ..........120,000 30% $220,000 150.000 S 70,000 55% East West $400,000 $200,000 200,000 200,000 $600,000 $400,000 Brooms Mops