Question

Exercise 6-7 Segmented Income Statement [LO6-4]

Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $490,000, 38%, and $9,800, respectively. The North Division’s contribution margin and contribution margin ratio are $100,800 and 42%, respectively. The South Division’s segment margin is $35,000. The company has $68,600 of common fixed expenses that cannot be traced to either division.

Required:

Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. In addition, for the company as a whole and for each segment, show each item on the segmented income statements as a percent of sales. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3).)

Answer 1

	Total company		North		South
	Amount	%	Amount	%	Amount	%
Sales	$490,000	100.0%	$240,000	100.0%	$250,000	100.0%
Variable expenses	$303,800	62.0%	$139,200	58.0%	$164,600	65.8%
Contribution margin	$186,200	38.0%	$100,800	42.0%	$85,400	34.2%
Traceable Fixed expenses	$107,800	22.0%	$57,400	23.9%	$50,400	20.2%
Territorial segment margin	$78,400	16.0%	$43,400	18.1%	$35,000	14.0%
Common Fixed expenses	$68,600
Net Operating Income	$9,800