Question

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 $380,000, 34%, and $7,600, respectively. The North Division’s contribution margin and contribution margin ratio are $83,600 and 38%, respectively. The South Division’s segment margin is $19,200. The company has $45,600 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

		Divisions
	Total Company		North		South
	Amount	%	Amount	%	Amount	%
Sales	380000	100.0%	220000	100.0%	160000	100.0%
Variable expenses	250800	66.0%	136400	62.0%	114400	71.5%
Contribution margin	129200	34.0%	83600	38.0%	45600	28.5%
Traceable fixed expenses	76000	20.0%	49600	22.5%	26400	16.5%
Territorial segment margin	53200	14.0%	34000	15.5%	19200	12.0%
Common fixed expenses	45600	12.0%
Net operating income	7600	2.0%