Question

Segmented Income Statement

Gorman Nurseries Inc. grows poinsettias and fruit trees in a green house/nursery operation. The following information was provided for the coming year.

	Poinsettias	Fruit Trees
Sales	$970,000	$3,100,000
Variable cost of goods sold	460,000	1,630,000
Direct fixed overhead	160,000	200,000

A sales commission of 4% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $146,000 for the poinsettia line and $87,000 for the fruit tree line.

Common fixed overhead for the nursery operation was estimated to be $800,000; common selling and administrative expense was estimated to be $450,000.

Required:

Prepare a segmented income statement for Gorman Nurseries for the coming year, using variable costing.

Note: Enter all amounts as positive numbers except operating loss, if applicable.

Gorman Nurseries Inc.
Segmented Income Statement
For the Coming Year
	Poinsettias	Fruit Trees	Total
Sales	$	$	$
Less variable expenses:
Variable cost of goods sold
Variable selling expense
Contribution margin	$	$	$
Less direct fixed expenses:
Direct fixed overhead
Direct selling and administrative
Segment margin	$	$	$
Less common fixed expenses:
Common fixed overhead
Common selling and administrative
Operating Loss			$

Answer 1

Answer :

Segmented income statement

#	Poinsettias	Fruit Trees	Total
Sales Revenue	970000	3100000	4070000
Less : Varible expense	-	-	-
Variable cost of goods sold	460000	1630000	2090000
Sales commission	38800	124000	162800
Contribution margin	471200	1346000	1817200
Less : Direct fixed expense	-	-	-
Fixed overhead	160000	200000	360000
Fixed selling and administrative	146000	87000	233000
Segment margin	165200	1059000	1224200
Less : Common Fixed expense	-	-	-
Fixed overhead	-	-	800000
Fixed selling and administrative	-	-	450000
Net operating income	-	-	-25800

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