Question

Required information [The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $79 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 50,000 units and sold 45,000 units. Variable costs per unit: Manufacturing: Direct materials $ 29 Direct labor $ 16 Variable manufacturing overhead $ 2 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 800,000 Fixed selling and administrative expense $ 516,000 The company sold 35,000 units in the East region and 10,000 units in the West region. It determined that $240,000 of its fixed selling and administrative expense is traceable to the West region, $190,000 is traceable to the East region, and the remaining $86,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. 13. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions.

Answer 1

13
	Total company	East	West
Sales	3555000	2765000	790000
Variable Expenses	2295000	1785000	510000
Contribution Margin	1260000	980000	280000
Traceable Fixed expenses	430000	190000	240000
Region segment margin	830000	790000	40000
Common fixed expenses not traceable to regions	886000
Net operating loss	(56000)
Workings:
Sales:
East = 35000*79 =$2765000
West = 10000*79 = $790000
Variable cost per unit=29+16+2+4 = $51
Variable costs:
East = 35000*51 = $1785000
West = 10000*51 =$510000