Problem - Income Statements Segmented by Territory
Script, Inc., has two product lines. The September income statements of each product line and the company are as follows:
| Sales |
$25,000 |
$30,000 |
$55,000 |
| Less variable expenses |
(10,000) |
(12,000) |
(22,000) |
| Contribution margin |
15,000 |
18,000 |
33,000 |
| Less direct fixed expenses |
(9,000) |
(7,000) |
(16,000) |
| Product margin |
$6,000 |
$11,000 |
$17,000 |
| Less common fixed expenses |
|
|
(6,000) |
| Net income |
|
|
$11,000 |
Pens and pencils are sold in two territories, Florida and Alabama, as follows:
| Pen sales |
$12,000 |
$13,000 |
| Pencil sales |
8,000 |
22,000 |
| Total sales |
$20,000 |
$35,000 |
The preceding common fixed expenses are traceable to each territory as follows:
| Florida fixed expenses |
$2,000 |
| Alabama fixed expenses |
3,000 |
| Home office administration fixed expenses |
1,000 |
| Total common fixed expenses |
$6,000 |
The direct fixed expenses of pens, $9,000, and of pencils, $7,000, cannot be identified with either territory. The company's accountants were unable to allocate any of the common fixed expenses to the various segments.
(a) Prepare income statements segmented by territory for September, including a column for the entire firm. Do not use negative signs with your answers.