Prepare a new contribution format segmented income statement

Question

Diversified Products, Inc., has recently acquired a small publishing company that Diversified Products intends to operate as one of its investment centers. The newly acquired company has three books that it offers for sale-a cookbook, a travel guide, and a handy speller. Each book sells for $10.1. The publishing company's most recent monthly income statement is given below:

				Product Line
	Total Company			Cookbook			Travel Guide			Handy Speller
Sales	$	317,000		$	95,100		$	158,500		$	63,400
Expenses:
Printing costs		100,500			28,100			60,700			11,700
Advertising		34,100			14,800			16,800			2,500
General sales		21,000			6,300			10,500			4,200
Salaries		30,300			19,000			7,100			4,200
Equipment depreciation		6,900			2,300			2,300			2,300
Sales commissions		44,380			13,314			22,190			8,876
General administration		36,300			12,100			12,100			12,100
Warehouse rent		13,800			4,140			6,900			2,760
Depreciation-office facilities		4,200			1,400			1,400			1,400
Total expenses		291,480			101,454			139,990			50,036
Net operating income (loss)	$	25,520		$	(6,354	)	$	18,510		$	13,364

The following additional information is available about the company:

a.	Only printing costs and sales commissions are variable; all other costs are fixed. The printing costs (which include materials, labor, and variable overhead) are traceable to the three product lines as shown in the statement above. Sales commissions are 14% of sales for any product.
b.	The same equipment is used to produce all three books, so the equipment depreciation cost has been allocated equally among the three product lines. An analysis of the company's activities indicates that the equipment is used 35% of the time to produce cookbooks, 50% of the time to produce travel guides, and 15% of the time to produce handy spellers.
c.	The warehouse is used to store finished units of product, so the rental cost has been allocated to the product lines on the basis of sales dollars. The warehouse rental cost is $3 per square foot per year. The warehouse contains 55,200 square feet of space, of which 8,280 square feet is used by the cookbook line, 27,600 square feet by the travel guide line, and 19,320 square feet by the handy speller line.
d.	The general sales cost above includes the salary of the sales manager and other sales costs not traceable to any specific product line. This cost has been allocated to the product lines on the basis of sales dollars.
e.	The general administration cost and depreciation of office facilities both relate to administration of the company as a whole. These costs have been allocated equally to the three product lines.
f.	All other costs are traceable to the three product lines in the amounts shown on the statement above.

The management of Diversified Products, Inc., is anxious to improve the new investment center's 5% return on sales.

Requirement 1:

Prepare a new contribution format segmented income statement for the month. Adjust allocations of equipment depreciation and of warehouse rent as indicated by the additional information provided. (Omit the "$" sign in your response.) Total Company Cookbook Travel Guide Handy Speller Sales $ $ $ $ Variable Expenses: ---------------------------------------------------------------------------------- Printing cost Sales Commissions Total variable expenses: Contribution margin: Traceable fixes expenses: --------------------------------------------------------------------------- Advertising Salaries Equipment depreciation Warehouse rent Total traceable fixed expenses Product line segment margin $ $ $ $ Common Fixed Expenses: -------------------------------------------------------------------------- general sales general administration depreciation-office facilities Total common fixes expenses Net operating income (loss) $