Question

Diego Company manufactures one product that is sold for $77 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 48,000 units and sold 43,000 units.

Variable costs per unit:
Manufacturing:
Direct materials	$	27
Direct labor	$	12
Variable manufacturing overhead	$	3
Variable selling and administrative	$	5
Fixed costs per year:
Fixed manufacturing overhead	$	864,000
Fixed selling and administrative expense	$	456,000

The company sold 33,000 units in the East region and 10,000 units in the West region. It determined that $220,000 of its fixed selling and administrative expense is traceable to the West region, $170,000 is traceable to the East region, and the remaining $66,000 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

	Contribution Income statemnt
		East	West	Total Company
	Sales	$25,41,000	$7,70,000	$33,11,000
	Variable cost:
	Direct Materials	$8,91,000	$2,70,000	$11,61,000
	Direct labor	$3,96,000	$1,20,000	$5,16,000
	Variable manufacturing overhead	$99,000	$30,000	$1,29,000
	Variable selling and administrativ expenses	$1,65,000	$50,000	$2,15,000
Less:	Total Variable cost	$15,51,000	$4,70,000	$20,21,000
	Contribution Margin	$9,90,000	$3,00,000	$12,90,000
Less:	Traceable Fixed expenses(Fixed selling and administrativ expenses)	$1,70,000	$2,20,000	$3,90,000
	Segment Margin	$8,20,000	$80,000	$9,00,000
Less:	Common Fixed Expenses($864,000+$66,000)			$9,30,000
	Net Income			-$30,000