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

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

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

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.

Textbook

Managerial Accounting

Edition: 4^th

Author: Davis

Read 85 times

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