Problem 6-21 Segment Reporting and Decision Making [LO6-4]

Vulcan Companys contribution format income statement for June is given below:

Vulcan Company Income Statement For the Month Ended June 30
Sales	$	900,000
Variable expenses		400,000
Contribution margin		500,000
Fixed expenses		460,000
Net operating income	$	40,000

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 territoriesNorthern and Southern. The Northern Territory recorded $400,000 in sales and $180,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $208,000 and $125,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories.
b.	The company is the exclusive distributor for two productsPaks and Tibs. Sales of Paks and Tibs totaled $120,000 and $280,000, respectively, in the Northern territory during June. Variable expenses are 24% of the selling price for Paks and 54% for Tibs. Cost records show that $52,800 of the Northern Territorys fixed expenses are traceable to Paks and $53,200 to Tibs, 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. (Round the percentage answers to one decimal place (i.e .1234 should be entered as 12.3))

1b.	Prepare contribution format segmented income statements for the Northern Territory broken down by product line. (Round the percentage answers to one decimal place (i.e .1234 should be entered as 12.3))