Biology Forums - Study Force

Bill Jones Flooring's accountant, has prepared the following income statement for the month of May.

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Residential

Commercial

Total

Sales Revenue	$2,760,000	$3,125,000	$5,885,000
Variable expenses	1,305,00	2,520,000	3,825,000
Contribution margin	1,455,000	605,000	2,060,000
Fixed expenses	645,000	615,0000	1,260,000
Operating income	$   810,000	$   (10,000)	$   800,000

In preparing the income statement, Bill was unsure what to do with $240,000 in corporate fixed expenses that cannot be traced to a division. Since these costs were incurred to run the business, and he believed that each division benefited equally, he just allocated half to each division.

Required:

a.	How do you think Bill should have handled the $240,000 in corporate fixed

expenses?

b.	Prepare a segment margin income statement that highlights each division's

contribution
to corporate profits. Omit the heading.

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