Problem 6-19 Segment Reporting and Decision Making [LO4] -

Please explain how you arrived at your answers. This really helps me a lot! Thank you!

The most recent monthly contribution format income statement for Reston Company is given below:

Reston Company Income Statement For the Month Ended May 31
Sales	$	900,000	100.0	%
Variable expenses		400,000	44.4
Contribution margin		500,000	55.6
Fixed expenses		450,000	50.0
Net operating income	$	50,000	5.6	%

Management is disappointed with the companys performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following:

a.	The company is divided into two sales territoriesCentral and Eastern. The Central Territory recorded $400,000 in sales and $180,000 in variable expenses during May. The remaining sales and variable expenses were recorded in the Eastern Territory. Fixed expenses of $160,000 and $150,000 are traceable to the Central and Eastern Territories, respectively. The rest of the fixed expenses are common to the two territories.
b.	The company is the exclusive distributor for two productsAwls and Pows. Sales of Awls and Pows totaled $150,000 and $250,000, respectively, in the Central Territory during May. Variable expenses are 30% of the selling price for Awls and 54% for Pows. Cost records show that $75,000 of the Central Territorys fixed expenses are traceable to Awls and $57,500 to Pows, with the remainder common to the two products.

Required:

1a.

Prepare contribution format segmented income statements for the total company broken down between sales territories. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.)

Problem 6-19 Segment Reporting and Decision Making [LO4]

The most recent monthly contribution format income statement for Reston Company is given below:

Reston Company Income Statement For the Month Ended May 31
Sales	$	900,000	100.0	%
Variable expenses		400,000	44.4
Contribution margin		500,000	55.6
Fixed expenses		450,000	50.0
Net operating income	$	50,000	5.6	%

Management is disappointed with the companys performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following:

a.	The company is divided into two sales territoriesCentral and Eastern. The Central Territory recorded $400,000 in sales and $180,000 in variable expenses during May. The remaining sales and variable expenses were recorded in the Eastern Territory. Fixed expenses of $160,000 and $150,000 are traceable to the Central and Eastern Territories, respectively. The rest of the fixed expenses are common to the two territories.
b.	The company is the exclusive distributor for two productsAwls and Pows. Sales of Awls and Pows totaled $150,000 and $250,000, respectively, in the Central Territory during May. Variable expenses are 30% of the selling price for Awls and 54% for Pows. Cost records show that $75,000 of the Central Territorys fixed expenses are traceable to Awls and $57,500 to Pows, with the remainder common to the two products.

Required:

1a.

Prepare contribution format segmented income statements for the total company broken down between sales territories. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.) 1b. Prepare contribution format segmented income statements for the Central Territory broken down by product line. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your percentage answers to 1 decimal place. Omit the "$" and "%" signs in your response.)