Question

Shoe Shock Innovations manufactures athletic shoe inserts that cushion the foot and reduce the impact of exercise on the joints. The company has two divisions, Sole Inserts and Heel Inserts. A segmented income statement from last month follows.

	Sole Inserts Division		Heel Inserts Division		Total Shoe Shock
Sales revenue	$492,900		$2,524,000		$3,016,900
Less variable expenses	313,000		2,027,000		2,340,000
Contribution margin	179,900		497,000		676,900
Less traceable fixed expenses	124,900		349,900		474,800
Segment margin	$55,000		$147,100		202,100
Common fixed costs					170,700
Net operating income					$31,400

Chris Kelly is Shoe Shock’s sales manager. Although this statement provides useful information, Chris wants to know how well the company’s two distribution channels, specialty footwear stores and drug stores, are performing. Marketing data indicates that 20% of sole inserts and 75% of heel inserts are sold through specialty footwear stores. A recent analysis of corporate fixed costs revealed that 50% of all fixed costs are traceable to specialty footwear stores and 45% of all fixed costs to drug stores.

Prepare a segment margin income statement for Shoe Shock’s two distribution channels. (If the amount is negative then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).)

Answer 1