Bill Jones,Flooring's accountant,has prepared the following income statement for the month of May.
Residential Commercial Total
Sales revenue $2,760,000 $3,125,000 $5,885,000
Variable expenses 1,305,000 2,520,000 3,825,000
Contribution margin 1,455,000 605,000 2,060,000
Fixed expenses 645,000 615,000 1,260,000
Operating income $ 810,000 $ 10,000 $ 800,000
In preparing the income statement,Bill was unsure what to do with $240,000 in corporate fixed expenses that cannot be traced to a particular division.Since these costs were incurred to run the business as a whole,and he believed that each division benefited equally,he just allocated half to each division.
Required
a.How do you think Bill should have handled the $240,000 in corporate fixed expenses?
b.Prepare a segment margin income statement that highlights each division's contribution to corporate profits.

Question

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The Answer of Bill Jones,Flooring's accountant,has prepared the following income statement for the month of May.
Residential Commercial Total
Sales revenue $2,760,000 $3,125,000 $5,885,000
Variable expenses 1,305,000 2,520,000 3,825,000
Contribution margin 1,455,000 605,000 2,060,000
Fixed expenses 645,000 615,000 1,260,000
Operating income $ 810,000 $ 10,000 $ 800,000
In preparing the income statement,Bill was unsure what to do with $240,000 in corporate fixed expenses that cannot be traced to a particular division.Since these costs were incurred to run the business as a whole,and he believed that each division benefited equally,he just allocated half to each division.
Required
a.How do you think Bill should have handled the $240,000 in corporate fixed expenses?
b.Prepare a segment margin income statement that highlights each division's contribution to corporate profits.

Bill Jones,Flooring's Accountant,has Prepared the Following Income Statement for the Month