Problem 6 -21 – Vulcan Company 2023 Business Finance
2023 Vulcan Company Income Statement For the Month Ended June 30 Sales
| Vulcan Company | ||||||||||
| Income Statement | ||||||||||
| For the Month Ended June 30 | ||||||||||
| Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $750,000 | ||||||||||
| Variable expenses . . . . . . . . . . . . . . . . . . . . . . . 336,000 | ||||||||||
| Contribution margin . . . . . . . . . . . . . . . . . . . . . . 414,000 | ||||||||||
| Fixed expenses . . . . . . . . . . . . . . . . . . . . . . . . . 378,000 | ||||||||||
| Net operating income . . . . . . . . . . . . . . . . . . . . $ 36,000 | ||||||||||
| Management is disappointed with the company’s performance and is wondering what can be | ||||||||||
| done to improve profits. By examining sales and cost records, you have determined the following: | ||||||||||
| a. The company is divided into two sales territories—Northern and Southern. The Northern territory | ||||||||||
| recorded $300,000 in sales and $156,000 in variable expenses during June; the remaining | ||||||||||
| sales and variable expenses were recorded in the Southern territory. Fixed expenses of | ||||||||||
| $120,000 and $108,000 are traceable to the Northern and Southern territories, respectively. | ||||||||||
| The rest of the fixed expenses are common to the two territories. | ||||||||||
| b. The company is the exclusive distributor for two products—Paks and Tibs. Sales of Paks and | ||||||||||
| Tibs totaled $50,000 and $250,000, respectively, in the Northern territory during June. Variable | ||||||||||
| expenses are 22% of the selling price for Paks and 58% for Tibs. Cost records show that | ||||||||||
| $30,000 of the Northern territory’s fixed expenses are traceable to Paks and $40,000 to Tibs, | ||||||||||
| with the remainder common to the two products. | ||||||||||
| Required: | ||||||||||
| 1. Prepare contribution format segmented income statements first showing the total company | ||||||||||
| broken down between sales territories and then showing the Northern territory broken down | ||||||||||
| by product line. In addition, for the company as a whole and for each segment, show each item | ||||||||||
| on the segmented income statements as a percent of sales. | ||||||||||
| 2. Look at the statement you have prepared showing the total company segmented by sales territory. | ||||||||||
| What insights revealed by this statement should be brought to the attention of management? | ||||||||||
| 3. Look at the statement you have prepared showing the Northern territory segmented by product | ||||||||||
| lines. What insights revealed by this statement should be brought to the attention of management? | ||||||||||
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