Vulcan Company's contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales. Variable expenses Contribution margin Fixed expenses Net operating income $ 800,000 300,000 500,000 475,000 $ 25,000 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: a. The company is divided into two sales territories-Northern and Southern. The Northern Territory recorded $400,000 in sales and $220,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $156,000 and $100,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories. b. The company is the exclusive distributor for two products-Paks and Tibs. Sales of Paks and Tibs totaled $100,000 and $300,000, respectively, in the Northern territory during June. Variable expenses are 25% of the selling price for Paks and 65% for Tibs. Cost records show that $45,000 of the Northern Territory's fixed expenses are traceable to Paks and $75,000 to Tibs, with the remainder common to the two products.
Vulcan Company's contribution format income statement for June is as follows: Vulcan Company Income Statement For the Month Ended June 30 Sales. Variable expenses Contribution margin Fixed expenses Net operating income $ 800,000 300,000 500,000 475,000 $ 25,000 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: a. The company is divided into two sales territories-Northern and Southern. The Northern Territory recorded $400,000 in sales and $220,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory. Fixed expenses of $156,000 and $100,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed expenses are common to the two territories. b. The company is the exclusive distributor for two products-Paks and Tibs. Sales of Paks and Tibs totaled $100,000 and $300,000, respectively, in the Northern territory during June. Variable expenses are 25% of the selling price for Paks and 65% for Tibs. Cost records show that $45,000 of the Northern Territory's fixed expenses are traceable to Paks and $75,000 to Tibs, with the remainder common to the two products.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Vulcan Company's contribution format income statement for June is as follows:
Vulcan Company
Income Statement
For the Month Ended June 30
Sales
Variable expenses
Contribution margin
Fixed expenses
Net operating income
$
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:
800,000
300,000
500,000
475,000
$ 25,000
a. The company is divided into two sales territories-Northern and Southern. The Northern Territory recorded $400,000 in sales and
$220,000 in variable expenses during June; the remaining sales and variable expenses were recorded in the Southern Territory.
Fixed expenses of $156,000 and $100,000 are traceable to the Northern and Southern Territories, respectively. The rest of the fixed
expenses are common to the two territories.
b. The company is the exclusive distributor for two products-Paks and Tibs. Sales of Paks and Tibs totaled $100,000 and $300,000,
respectively, in the Northern territory during June. Variable expenses are 25% of the selling price for Paks and 65% for Tibs. Cost
records show that $45,000 of the Northern Territory's fixed expenses are traceable to Paks and $75,000 to Tibs, with the remainder
common to the two products.
Req 1A
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.
Complete this question by entering your answers in the tabs below.
Reg 1B
Expert Solution
Notes
The remaining common fixed expenses = Total fixed expenses - Traceable fixed expenses
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