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Ch07 adj Werner Jones Mgt Acctg PP97 2003

Segment functional format contribution income format

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Unformatted text preview: business segment are called segment reports. segment segment 7 ­ 42 The Segment Income Statement An income statement prepared for one segment of a business is called a segment income statement. segment Functional Format Contribution Income Format 7 ­ 43 The Segment Income Statement QUINTANA COMPANY MIAMI OFFICE Segment Income Statement For the Year Ended December 31, 2004 Sales Variable cost Contribution margin Fixed cost for Miami office Segment margin $1,200,000 800,000 $ 400,000 300,000 $ 100,000 7 ­ 44 Identifying Segment Costs By definition, variable costs are “caused” by some sort of activity or volume. If that activity or volume is related to a particular segment, then so is the variable cost. Fixed costs are more difficult to trace. 7 ­ 45 Identifying Segment Costs Fixed costs that arise to support a single segment are called direct (or traceable) fixed costs. traceable Fixed costs that are related to more than one segment are common than common (or indirect) fixed costs. (or indirect) 7 ­ 46 Flandro Feed Stores Segment Income Statement For the Year Ended December 31, 2005 Company Total Sales $500,000 Variable cost 332,950 332,950 Contribution margin $167,050 Direct fixed cost 75,000 75,000 Segment margin $ 92,050 Common fixed cost 60,000 60,000 Net income $ 32,050 North Store $105,000 73,750 73,750 $ 31,250 20,000 20,000 $ 11,250 12,6001 12,600 $ (1,350) South Store $225,000 141,000 141,000 $ 84,000 32,000 32,000 $ 52,000 27,0002 27,000 $ 25,000 Central...
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