Home / Questions / Restructuring a Segmented Income Statement Brabant NV of the Netherlands is a wholesale di...
Restructuring a Segmented Income Statement
Brabant NV of the Netherlands is a wholesale distributor of Dutch cheeses that it sells throughout the European Community. Unfortunately, the company’s profits have been declining, which has caused considerable concern. To help understand the condition of the company, the managing director of the company has requested that the monthly income statement be segmented by sales territory. Accordingly, the company’s accounting department has prepared the following statement for March, the most recent month. (The Dutch currency is the euro which is designated by €.)
|
|
Sales Territory |
|
||
Southern Europe |
Middle Europe |
Northern Europe |
|||
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
€300,000 |
€800,000 |
€700,000 |
||
Territorial expenses (traceable): Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . |
93,000 |
240,000 |
315,000 |
||
Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
54,000 |
56,000 |
112,000 |
||
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
9,000 |
16,000 |
14,000 |
||
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
105,000 |
240,000 |
245,000 |
||
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
21,000 |
32,000 |
28,000 |
||
Shipping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
15,000 |
32,000 |
42,000 |
||
Total territorial expenses . . . . . . . . . . . . . . . . . . . . . . |
297,000 |
616,000 |
756,000 |
||
Territorial income (loss) before corporate expenses . . . . . . . . . . . . . . . . . . |
3,000 |
184,000 |
(56,000) |
||
Corporate expenses: |
|
|
|
||
Advertising (general) . . . . . . . . . . . . . . . . . . . . . . . |
15,000 |
|
40,000 |
35,000 |
|
General administrative . . . . . . . . . . . . . . . . . . . . . |
20,000 |
|
20,000 |
20,000 |
|
Total corporate expenses . . . . . . . . . . . . . . . . . . . . . |
35,000 |
|
60,000 |
55,000 |
|
Net operating income (loss) . . . . . . . . . . . . . . . . . . . |
€(32,000) |
|
€124,000 |
€(111,000) |
|
Cost of goods sold and shipping expenses are both variable; other costs are all fixed. Brabant NV purchases cheeses at auction and from farmers’ cooperatives, and it distributes them in the three territories listed above. Each of the three sales territories has its own manager and sales staff. The cheeses vary widely in profitability; some have a high margin and some have a low margin. (Certain cheeses, after having been aged for long periods, are the most expensive and carry the highest margins.)
Required:
1. List any disadvantages or weaknesses that you see to the statement format illustrated above.
2. Explain the basis that is apparently being used to allocate the corporate expenses to the ter- ritories. Do you agree with these allocations? Explain.
3. Prepare a new segmented contribution format income statement for May. Show a Total col- umn as well as data for each territory. In addition, for the company as a whole and for each sales territory, show each item on the segmented income statement as a percent of sales.
4. Analyze the statement that you prepared in (3) above. What points that might help to improve the company’s performance would you bring to management’s attention?
Jun 28 2020 View more View Less
Choose the correct answer.One of the reasons Coca-Cola's sales are sagging, in addition to those already mentioned,(a) seems,(b) seemto be the double-digit growth of the ...
Jul 01 2021On January 1, 2016, you made an initial deposit of $400 into a savings account to begin saving to pay for 3 years of horseback riding lessons that you plan to begin on Ja...
Nov 23 2019Question 2 (less than 250 words) in wake of the pandemic, you are planning to start a home delivery service in Oman for fresh produce and grocery items such as flour, oil...
Apr 02 2021Consider the species, PO4(3-) HPO4(2-) and H2PO4-. Each ion can act as a base in water. What is the Kb value for each of these species?
Jul 29 2021Within 10%, how many cadets are in the Junior Reserve Officer Training Corps across the United States?
Aug 11 2021Finding an Inverse FunctionIn Exercises 33-38, (a) find the inverse function of f ,(b) graph f and on the same set of coordinate axes,(c) verify that ,and , and(d) stat...
Aug 16 2021List four ways the human body expels heat?
Jun 10 2021Grossnickle Corporation issued 20-year, noncallable, 8.1% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds is...
Jul 08 2021An investment has an installed cost of $531,800. The cash flows over the four-year life of the investment are projected to be $217,850, $234,450, $201,110, and $149,820. ...
May 15 2020You are required to write a BUSINESS REPORT. Students are expected to engage in extensive research within the academic literature (peer-reviewed journals) relevant to the...
May 25 2020