Vulcan Company's contribution format income statement for Juneis given below:
Vulcan Company
Income Statement
For the Month Ended June 30 Sales $859,000 Variable expenses 396,858
Contribution margin 462,142 Fixed expenses 436,372
Netoperating income $25,770
Management isdisappointed with the company's performance and is wondering whatcan be done to improve profits. By examining sales and costrecords, you have determined the following:
a. The company is divided into two salesterritories%u2014Northern and Southern. The Northern territoryrecorded $411,000 in sales and $209,850 in variable expenses duringJune; the remaining sales and variable expenses were recorded inthe Southern territory. Fixed expenses of $150,000 and $120,000 aretraceable to the Northern and Southern territories, respectively.The rest of the fixed expenses are common to the twoterritories.
b. The company is the exclusive distributor for twoproducts%u2014Paks and Tibs. Sales of Paks and Tibs totaled$105,000 and $306,000, respectively, in the Northern territoryduring June. Variable expenses are 25% of the selling price forPaks and 60% for Tibs. Cost records show that $57,000 of theNorthern territory's fixed expenses are traceable to Paks and$50,000 to Tibs, with the remainder common to the two products.
18. value:
19.00 points Problem 11-24 Requirement 1
Requirement 1: Prepare contribution format segmented incomestatements. (Roundpercentage computations to 1 decimal place. Negative amounts otherthan expenses should be indicated by a minus sign. Omit the "$" and"%" signs in your response.)
Sales Territory Total Company Northern Southern Amount % Amount % Amount % Sales $ $ $ Variable expenses
Contribution margin
Traceable fixed expenses
Sales territory segment margin $
$
Common fixed expenses Netoperating income $
Product Line Northern Territory Paks Tibs Amount % Amount % Amount % Sales $ $ $ Variable expenses
Contribution margin Traceable fixed expenses
Product line segment margin $
$
Common fixed expenses Sales territory segment margin $
19. value:
1.00 points Problem 11-24 Requirement 2
Requirement 2: Based on the above incomestatements, which of the following the statement(s) is true?(Select all thatapply.)
The high traceable fixed expenses of the Paksproduct may simply mean that the Paks product is not highlyleveraged. The Northern territory has high traceable fixedexpenses. An increase in sales of Paks product line wouldnot greatly enhance profits in the Northern territory. Compared to the Southern territory, the Northernterritory has a low contribution margin ratio. The Northern territory has a poor salesmix. Overall, compared to the Southern territory, theNorthern territory is very weak.
Vulcan Company's contribution format income statement for Juneis given below:
Vulcan Company Income Statement For the Month Ended June 30 | |
Sales | $859,000 |
Variable expenses | 396,858 |
Contribution margin | 462,142 |
Fixed expenses | 436,372 |
Netoperating income | $25,770 |
Management isdisappointed with the company's performance and is wondering whatcan be done to improve profits. By examining sales and costrecords, you have determined the following: |
a. | The company is divided into two salesterritories%u2014Northern and Southern. The Northern territoryrecorded $411,000 in sales and $209,850 in variable expenses duringJune; the remaining sales and variable expenses were recorded inthe Southern territory. Fixed expenses of $150,000 and $120,000 aretraceable to the Northern and Southern territories, respectively.The rest of the fixed expenses are common to the twoterritories. |
b. | The company is the exclusive distributor for twoproducts%u2014Paks and Tibs. Sales of Paks and Tibs totaled$105,000 and $306,000, respectively, in the Northern territoryduring June. Variable expenses are 25% of the selling price forPaks and 60% for Tibs. Cost records show that $57,000 of theNorthern territory's fixed expenses are traceable to Paks and$50,000 to Tibs, with the remainder common to the two products. |
19.00 points
Problem 11-24 Requirement 1
Requirement 1: |
Prepare contribution format segmented incomestatements. (Roundpercentage computations to 1 decimal place. Negative amounts otherthan expenses should be indicated by a minus sign. Omit the "$" and"%" signs in your response.) |
Sales Territory | ||||||
Total Company | Northern | Southern | ||||
Amount | % | Amount | % | Amount | % | |
Sales | $ | $ | $ | |||
Variable expenses |
|
|
| |||
Contribution margin |
|
|
| |||
Traceable fixed expenses |
|
|
| |||
Sales territory segment margin | $ |
| $ |
| ||
Common fixed expenses | ||||||
Netoperating income | $ |
| ||||
Product Line | ||||||
Northern Territory | Paks | Tibs | ||||
Amount | % | Amount | % | Amount | % | |
Sales | $ | $ | $ | |||
Variable expenses |
|
|
| |||
Contribution margin | ||||||
Traceable fixed expenses |
|
|
| |||
Product line segment margin | $ |
| $ |
| ||
Common fixed expenses | ||||||
Sales territory segment margin | $ |
| ||||
1.00 points
Problem 11-24 Requirement 2
Requirement 2: |
Based on the above incomestatements, which of the following the statement(s) is true?(Select all thatapply.) |
The high traceable fixed expenses of the Paksproduct may simply mean that the Paks product is not highlyleveraged. | |
The Northern territory has high traceable fixedexpenses. | |
An increase in sales of Paks product line wouldnot greatly enhance profits in the Northern territory. | |
Compared to the Southern territory, the Northernterritory has a low contribution margin ratio. | |
The Northern territory has a poor salesmix. | |
Overall, compared to the Southern territory, theNorthern territory is very weak. |