Question

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)

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%)