Problem 7-26 Restructuring a Segmented Income Statement [LO7-4]

Millard Corporation is a wholesale distributor of office products. It purchases office products from manufacturers and distributes them in the West, Central, and East regions. Each of these regions is about the same size and each has its own manager and sales staff.

The company has been experiencing losses for many months. In an effort to improve performance, management has requested that the monthly income statement be segmented by sales region. The companys first effort at preparing a segmented income statement for May is given below.

	Sales Region
	West				Central			East
Sales	$	312,000			$	797,000		$	695,000
Regional expenses (traceable):
Cost of goods sold		98,000				237,000			317,000
Advertising		103,000				242,000			243,000
Salaries		58,000				58,000			113,000
Utilities		9,100				15,800			13,800
Depreciation		23,000				33,000			29,000
Shipping expense		18,000				33,000			44,000
Total regional expenses		309,100				618,800			759,800
Regional income (loss) before corporate expenses		2,900				178,200			(64,800	)
Corporate expenses:
Advertising (general)		17,000				42,000			36,000
General administrative expense		21,000				21,000			21,000
Total corporate expenses		38,000				63,000			57,000
Net operating income (loss)	$	(35,100	)		$	115,200		$	(121,800	)

The cost of goods sold and shipping expense are both variable. All other costs are fixed.

Required:

3. Prepare a new contribution format segmented income statement for May. (Round percentage answers to 1 decimal place.)