Sales $900,000 100.0%
Variable expenses 408,000 45.3
Contribution margin 492,000 54.7
Fixed expenses 465,000 51.7
Net operating income $ 27,000 3.0
By examining sales and cost records, you have determined the following.
The company is divided into two sales territories â€“ Central and Eastern. The Central Territory recorded $400,000 in sales and $208,000 in variable expenses during December. The remaining sales and variable expenses were recorded in the Eastern Territory. Fixed expenses of $160,000 and $130,000 are traceable to the Central and Eastern Territories respectively. The rest of the fixed expenses are common to the two territories.
Prepare a contribution format income statement showing the company broken down by sales territory. In addition show each item on the segmented income statement as a percentage of sales.
Look at the statement you have prepared showing the total company segmented by sales territory. What points revealed by this statement should be brought to managementâ€™s attention? (SHOW YOUR WORK)