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
A program is required to construct a data structure for different types of metal tubes manufactured by a certain company. Each type has a reference number, a string repr...
Aug 19 2020Running head: PERSONAL VALUES AND ETHICAL STANDARDS PAPER 1BSHS 332 Personal Values and Ethical Standards PaperWritea 2,100- to 2,450-word paper on the development of you...
Jul 31 2020One-year Treasury bills currently earn 3.65 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 3.85 percent. The liquidity premium on...
Aug 18 2020Which two items are typically omitted from “net operating income” for return on investment (ROI) purposes. Why are these two items omitted? 91. What is residual income a...
Jan 09 2020PROBLEM-SOLVING APPLICATION CASE (PSAC)Writing the Book (Review) on Conflict of InterestIf you’re not getting glowing online reviews for your product, maybe you could buy...
Jul 21 2020Determine the member end moments and reactions for the frame of Fig. P17.23 for the loading shown in the figure and the support settlements of 20 mm at A and 30 mm at D. ...
May 25 2020You have recently assumed the role of HR Manager in your company. In reviewing the company records, you note that the job descriptions were last updated 5 years ago. The ...
Jun 02 2020In a food processing facility, a spherical container of inner radius r1 = 40 cm, outer radius r2 = 41 cm, and thermal conductivity k = 1.5 W/m·K is used to store hot wate...
Jul 21 2020Is paying the advisory fee a bribe or an acceptable cost of doing business in that area of the world? What should the executives do before agreeing to pay the fee?
Feb 04 2020Which of the following is not correct? (a)Each entity must include some descriptive information (b)If an object only requires an identifier, it should be classified a...
Jan 03 2018