Answer Happy

Problem 6-21 (Algo) Segment Reporting and Decision-Making
[LO6-4]
Vulcan Company’s contribution format income statement for June
is as follows:
Management is disappointed with the company’s performance and is
wondering what can be done to improve profits. By examining sales
and cost records, you have determined the following:
The company is divided into two sales territories—Northern and
Southern. The Northern Territory recorded $400,000 in sales and
$228,000 in variable expenses during June; the remaining sales and
variable expenses were recorded in the Southern Territory. Fixed
expenses of $168,000 and $130,000 are traceable to the Northern and
Southern Territories, respectively. The rest of the fixed expenses
are common to the two territories.
The company is the exclusive distributor for two products—Paks
and Tibs. Sales of Paks and Tibs totaled $140,000 and $260,000,
respectively, in the Northern territory during June. Variable
expenses are 31% of the selling price for Paks and 71% for Tibs.
Cost records show that $64,400 of the Northern Territory’s fixed
expenses are traceable to Paks and $52,000 to Tibs, with the
remainder common to the two products.
Required:
1-a. Prepare contribution format segmented income statements for
the total company broken down between sales territories.
1-b. Prepare contribution format segmented income statements for
the Northern Territory broken down by product line.