221_Solutions_Chap_13_Sp_07

221_Solutions_Chap_13_Sp_07 - E13-20 a Script Inc Territory...

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E13-20 a. Script, Inc. Territory and Company Income Statements For the Month of September Company Florida Alabama Totals Sales: Pens $15,000 $ 10,000 $25,000 Pencils 9,000 21,000 30,000 Total sales $24,000 $31,000 $55,000 Variable costs: Pens (10/25 × sales dollars) $ 6,000 $ 4,000 $ 10,000 Pencils (12/30 × sales dollars) 3,600 8,400 12,000 Total (9,600 ) (12,400 ) (22,000 ) Contribution margin $14,400 $18,600 $33,000 Direct fixed expenses (2,000 ) (3,000 ) (5,000 ) Territory margin $12,400 $15,600 $28,000 Common fixed expenses: Pens $ 9,000 Pencils 7,000 Home office 1,000 Total (17,000 ) Net income $ 11,000 b. Because the allocation base changes and different expenses are related to separate bases, the direct expenses change with the type of segment base used. In this problem, the segment base changed from products to territories.
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