Digital 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 segmentreport?

Janitorial Products, Inc. Income Statement Total Brooms Mops Sales Less variable expenses6 Contribution margin. S 400,000 $180,000 Less direct fixed costs Segmentmargin... Less common fixed costs Net income .$1,000,000 S600,000 100% 70 0 $400,000 180,000 100% 600,000 420,000 45 2o$220,000 150,000 S 70,000 200,000 50,000 S 200,000 $130,000 120,000 $ 80,000 East S400,000 200,000 West $200,000 200,000 Brooms Mops. Total