Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented...

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Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Divisions Total Company R 4, 675, 000 Leather R 1, 925, 000 Cloth R 2, 750, 000 1, 140, 000 1, 610, 000 Sales Variable expenses 2, 213, 000 1, 073, 000 2, 462, 000 852, 000 Contribution margin Traceable fixed expenses: Advertising Selling and administrative Depreciation Total traceable fixed expenses 810, 000 625, 000 265, 000 480, 000 390, 000 133, 000 330, 000 235, 000 132, 000 1,700, 000 1, 003, 000 697, 000 Divisional segment margin 762, 000 R 607, 000 R. 155, 000 Common fixed expenses 408, 000 Operating income R 354, 000 Top management can't understand why the Leather Division has such a low segment margin when its sales are only 30% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division: Leather Division Product Lines Garments Shoes R820, 000 Handbags R425, 000 Sales Traceable fixed expenses: Advertising Selling and administrative Depreciation Variable expenses as a percentage of sales R680, 000 R 66, 000 R 48, 000 R 37, 000 R 85, 000 R 53, 000 R 74, 000 R179, 000 R 40, 000 R 21, 000 65% 50% 52% Analysis shows that R94,000 of the Leather Division's selling and administrative expenses are common to the product lines. 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines. Product Line Leather Garments Shoes Handbags Division R R Traceable fixed expenses: Total traceable fixed expenses OR O R Common fixed expenses: R Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Divisions Total Company R 4, 675, 000 Leather R 1, 925, 000 Cloth R 2, 750, 000 1, 140, 000 1, 610, 000 Sales Variable expenses 2, 213, 000 1, 073, 000 2, 462, 000 852, 000 Contribution margin Traceable fixed expenses: Advertising Selling and administrative Depreciation Total traceable fixed expenses 810, 000 625, 000 265, 000 480, 000 390, 000 133, 000 330, 000 235, 000 132, 000 1,700, 000 1, 003, 000 697, 000 Divisional segment margin 762, 000 R 607, 000 R. 155, 000 Common fixed expenses 408, 000 Operating income R 354, 000 Top management can't understand why the Leather Division has such a low segment margin when its sales are only 30% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division: Leather Division Product Lines Garments Shoes R820, 000 Handbags R425, 000 Sales Traceable fixed expenses: Advertising Selling and administrative Depreciation Variable expenses as a percentage of sales R680, 000 R 66, 000 R 48, 000 R 37, 000 R 85, 000 R 53, 000 R 74, 000 R179, 000 R 40, 000 R 21, 000 65% 50% 52% Analysis shows that R94,000 of the Leather Division's selling and administrative expenses are common to the product lines. 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines. Product Line Leather Garments Shoes Handbags Division R R Traceable fixed expenses: Total traceable fixed expenses OR O R Common fixed expenses: R

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Solution 1 Product line leather div Garments Shoes Han... View the full answer