Question

12. GrandGlaze Co. is divided into three segments and is interested in preparing a segmented income...

12. GrandGlaze Co. is divided into three segments and is interested in preparing a segmented income statement in order to better understand the operating performance of each segment. Fixed expenses in each division currently include an allocation of general corporate expenses equal to 20% of the division's sales.

                                                     Division 1               Division 2               Division 3

Sales                                             $160,000                 $100,000              $140,000

variable expenses                         104,000                   60,000                   76,000

Contribution margin                        $56,000                  $40,000                $64,000

Fixed expenses                               40,000                   44,000                   36,000

Net income (loss)                           $16,000                  $(4,000)                  $28,000

Complete the following segmented income statement for GrandGlaze Co.

                                     Total company               Division1                Division 2                Division 3

Sales

Variable Expenses

Contribution margin

Direct fixed expenses

Segment margin

Common fixed expenses

Net income (loss)

Homework Answers

Answer #1
Total company Division 1 Division 2 Division 3
Sales 400000 160000 100000 140000
Variable Expenses 240000 104000 60000 76000
Contribution margin 160000 56000 40000 64000
Direct fixed expenses 40000 8000 24000 8000
Segment margin 120000 48000 16000 56000
Common fixed expenses 80000
Net income (loss) 40000
Workings:
Direct fixed expenses:
Division 1 =40000-(160000*20%)
Division 2 =44000-(100000*20%)
Division 3 =36000-(140000*20%)
Common fixed expenses =(160000*20%)+(100000*20%)+(140000*20%)
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