• District expenses were allocated to the stores based on sales.• New England Region general and administrative expenses of $162,000 were allocated to the Coastal District. These expenseswere, in turn, allocated equally to the district's three stores.Required:1. Prepare the May segmented income statement for the Coastal District and for the New Haven and Boston stores.2. Compute the Portland store's operating income for May.4. The assistant controller for the New England Region, Jack Isner, has been a close friend of the New Haven store manager for over20 years. When Isner saw the segmented income statement (as prepared in requirement 1), he realized that the New Haven storemanager had really gone overboard on advertising expenditures. To make his friend look better to the regional management, hereclassified $25,000 of the advertising expenditures as miscellaneous expenses, and buried them in rent and other costs. Theassistant controller's actions violate several standards of ethical conduct for management accountants, including the following: Cathy's Classic Clothes is a retailer that sells to professional women in the northeast. The firm leases space for stores in upscaleshopping centers, and the organizational structure consists of regions, districts, and stores. Each region consists of two or moredistricts; each district consists of three or more stores. Each store, district, and region has been established as a profit center. At all|levels, the company uses a responsibility-accounting system focusing on information and knowledge rather than blame and control.Each year, managers, in consultation with their supervisors, establish financial and nonfinancial goals, and these goals are integratedinto the budget. Actual performance is measured each month.The New England Region consists of the Coastal District and the Inland District. The Coastal District includes the New Haven, Boston,and Portland stores. The Coastal District's performance has not been up to expectations in the past. For the month of May, the districtmanager has set performance goals with the managers of the New Haven and Boston stores, who will receive bonuses if certainperformance measures are exceeded. The manager in Portland decided not to participate in the bonus scheme. Since the districtmanager is unsure what type of bonus will encourage better performance, the New Haven manager will receive a bonus based onsales in excess of budgeted sales of $570,000, while the Boston manager will receive a bonus based on operating income in excessof budget. The company's operating income goal for each store is 12 percent of sales. The budgeted sales revenue for the Bostonstore is $530,000.Other pertinent data for May are as follows:• Coastal District sales revenue was $1,590,000, and its cost of goods sold amounted to $632,750.• The Coastal District spent $105,000 on advertising.• General and administrative expenses for the Coastal District amounted to $180,000.• At the New Haven store, sales were 45 percent of Coastal District sales, while sales at the Boston store were 40 percent of districtsales. The cost of goods sold in both New Haven and Boston was 44 percent of sales.• Variable selling expenses (sales commissions) were 6 percent of sales for all stores, districts, and regions.• Variable administrative expenses were 2.6 percent of sales for all stores, districts, and regions.• Maintenance cost includes janitorial and repair services and is a direct cost for each store. The store manager has complete controlover this outlay. Maintenance costs were incurred as follows: New Haven, $7,600; Boston, $800; and Portland, $4,700.• Advertising is considered a direct cost for each store and is completely under the control of the store manager. The New Havenstore.spent two-thirds of the Coastal District total outlay for advertising, which was 10 times the amount spent in Boston onadvertising.• Coastal District rental expense amounted to $130,000.• The rental expenses at the New Haven store were 40 percent of the Coastal District's total, while the Boston store incurred 30percent of the district total.• District expenses were allocated to the stores based on sales.• New England Region general and administrative expenses of $162,000 were allocated to the Coastal District. These expenses

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Income Statement
The purpose of preparing the income statement is to know the net income which was…