Question

ch 6 exer 9

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 $780,000, 50%, and $62,400, respectively. The North Division’s contribution margin and contribution margin ratio are $247,500 and 75%, respectively. The South Division’s segment margin is $68,000. The company has $117,000 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. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3))

			Divisions
	Total Company		North		South
	Amount	%	Amount	%	Amount	%

Answer 1

		Divisions
	Total Company		North		South
	Amount	%	Amount	%	Amount	%
Sales	$780,000	100.0%	330000	100.0%	$450,000	100.0%
Variable expenses	$390,000	50.0%	82,500	25.0%	$307,500	68.3%
Contribution margin	$390,000	50.0%	247,500	75.0%	142,500	31.7%
Traceable fixed expenses	$210,600	27.0%	136,100	41.2%	74,500	16.6%
Division segment margin	$179,400	23.0%	$111,400	33.8%	$68,000	15.1%
Common fixed expenses	117,000	15.0%
Net operating income	$62,400	8.0%