Problem 7-24 (Static) Companywide and Segment Break-Even Analysis; Decision Making (L07- Toxaway Company is a merchandiser that segments its business into two divisions-Commercial and Residential. The comp accounting intern was asked to prepare segmented income statements that the company's divisional managers could use to their break-even points and make decisions. She took the prior month's companywide income statement and prepared the format segmented income statement shown below: Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Total Company Commercial $ 750,000 $ 250,000 500,000 140,000 250,000 110,000 240,000 104,000 $ 10,000 $ 6,000 ces Residential $ 500,000 360,000 140,000 136,000 $ 4 , . In preparing these statements, the intern determined that Toxaway's only variable selling and administrative expense is a 10% sa commission on all sales. The company's total fixed expenses include $72,000 of common fixed expenses that would continue to incurred even if the Commercial or Residential segments are discontinued. $55,000 of fixed expenses that would disappear if th Commercial segment is dropped, and $38,000 of fixed expenses that would disappear if the Residential segment is dropped "Required: 1. Do you agree with the intern's decision to use an absorption format for her segmented income statement? 2. Based on a review of the intem's segmented income statement a. How much of the company's common fixed expenses did she allocate to the Commercial and Residential segments? b. Which of the following three allocation bases did she most likely used to allocate common fixed expenses to the Commercial and 53F Partly clc