Question: Income Statements Segmented by Territory Script, Inc., has two product lines. The September income statements of each product line and the company are as follows:
Income Statements Segmented by Territory
Script, Inc., has two product lines. The September income statements of each product line and the company are as follows:
SCRIPT, INC.
Product Line and Company Income Statements
For Month of SeptemberPensPencilsTotalSales$25,000$30,000$55,000Less variable expenses(10,000)(12,000)(22,000)Contribution margin15,00018,00033,000Less direct fixed expenses(9,000)(8,000)(17,000)Product margin$6,000$10,000$16,000Less common fixed expenses(6,000)Net income$10,000
Pens and pencils are sold in two territories, Florida and Alabama, as follows:
FloridaAlabamaPen sales$14,000$11,000Pencil sales4,00026,000Total sales$18,000$37,000
The preceding common fixed expenses are traceable to each territory as follows:
Florida fixed expenses$2,000Alabama fixed expenses3,000Home office administration fixed expenses1,000Total common fixed expenses$6,000
The direct fixed expenses of pens, $9,000, and of pencils, $8,000, cannot be identified with either territory. The company's accountants were unable to allocate any of the common fixed expenses to the various segments.
Prepare income statements segmented by territory for September, including a column for the entire firm.Do not use negative signs with your answers.
Script, Inc.
Territory and Company Income Statements
For the Month of SeptemberFloridaAlabamaCompany TotalsSales:PensAnswer
Answer
Answer
PencilsAnswer
Answer
Answer
Total salesAnswer
Answer
Answer
Variable costs:PensAnswer
Answer
Answer
PencilsAnswer
Answer
Answer
TotalAnswer
Answer
Answer
Contribution marginAnswer
Answer
Answer
Direct fixed expensesAnswer
Answer
Answer
Territory marginAnswer
Answer
Answer
Common fixed expenses:PensAnswer
PencilsAnswer
Home officeAnswer
TotalAnswer
Net incomeAnswer
(b) Why are the direct expenses of one type of segment report not necessarily the direct expenses of another type of segment report?
Because direct expenses are all variable costs.
Because only fixed expenses are direct costs.
Because costs that may be directly traceable to one segment base (i.e., territory) may not be directly traceable to another segment base (i.e., product).
Because management must decide which costs are direct and which are indirect.
None of the above.
Please answer all parts of the question.
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts