Question

The following income statement was prepared to provide a basis for evaluating the performance of three territories in the Midwest Division of a company.

	Total	Chicago	Kansas City	St. Louis
	Division	Territory	Territory	Territory
Sales………………………	$452,000	$203,000	$122,000	$127,000
Cost Goods Sold …………	(203,400)	(94,400)	(52,500)	(56,500)
Gross Profit ………………	$248,600	$108,600	$ 69,500	$ 70,500
Operating Expenses………	(213,200)	(110,500)	(61,700)	(41,000)
Operating Income (Loss)…	$ 35,400	$ (1,900)	$    7,800	$ 29,500

Comment about the usefulness of the above income statement. What specific changes would you recommend?

Answer 1