I am resubmitting this question as it was not fully answered and it did not have the correct answers. Please help with the correct information. Toxaway Company is a merchandiser that segments its business into two divisions—Commercial and Residential. The company’s accounting intern was asked to prepare segmented income statements that the company’s divisional managers could use to calculate their break-even points and make decisions. She took the prior month’s companywide income statement and prepared the absorption format segmented income statement shown below:  Total CompanyCommercialResidentialSales$930,000 $310,000 $620,000 Cost of goods sold 623,100  170,500  452,600 Gross margin 306,900  139,500  167,400 Selling and administrative expenses 288,000  128,000  160,000 Net operating income$18,900 $11,500 $7,400   In preparing these statements, the intern determined that Toxaway’s only variable selling and administrative expense is a 10% sales commission on all sales. The company’s total fixed expenses include $69,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $52,000 of fixed expenses that would be avoided if the Residential segment is dropped, and $74,000 of fixed expenses that would be avoided if the Commericial segment is dropped. Required: 1. Do you agree with the intern’s decision to use an absorption format for her segmented income statement?   Yes No  2-a. Based on the intern’s segmented income statement, can you determine how she allocated the company’s common fixed expenses to the Commercial and Residential segments?   CommercialResidentialCommon fixed expenses   2-b. Do you agree with her decision to allocate the common fixed expenses to the Commercial and Residential segments?   Yes No 3. Redo the intern’s segmented income statement using the contribution format.  Toxaway CompanyVariable Costing Income Statement Total CompanyCommercialResidential $$$Variable expenses:               Total variable expenses             $$     $  4. Compute the companywide break-even point in dollar sales. (Round intermediate calculations to 3 decimal places and final answer to the nearest whole dollar amount. Do not consider the CM ratio in percentages.)   Break-even point in dollar sales 5. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount. Do not consider the CM ratio in percentages.)   Commercial DivisionResidential DivisionBreak-even point in dollar sales   6. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $23,000 and $46,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new break-even point in dollar sales for the Commercial Division and the Residential Division. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount. Do not consider the CM ratio in percentages.)    Commercial DivisionResidential DivisionBreak-even point in dollar sales

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Asked Jul 15, 2019
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I am resubmitting this question as it was not fully answered and it did not have the correct answers. Please help with the correct information.

 

Toxaway Company is a merchandiser that segments its business into two divisions—Commercial and Residential. The company’s accounting intern was asked to prepare segmented income statements that the company’s divisional managers could use to calculate their break-even points and make decisions. She took the prior month’s companywide income statement and prepared the absorption format segmented income statement shown below:

 

  Total Company Commercial Residential
Sales $ 930,000   $ 310,000   $ 620,000  
Cost of goods sold   623,100     170,500     452,600  
Gross margin   306,900     139,500     167,400  
Selling and administrative expenses   288,000     128,000     160,000  
Net operating income $ 18,900   $ 11,500   $ 7,400  
 

 

In preparing these statements, the intern determined that Toxaway’s only variable selling and administrative expense is a 10% sales commission on all sales. The company’s total fixed expenses include $69,000 of common fixed expenses that would continue to be incurred even if the Commercial or Residential segments are discontinued, $52,000 of fixed expenses that would be avoided if the Residential segment is dropped, and $74,000 of fixed expenses that would be avoided if the Commericial segment is dropped.

 

Required:

 

1. Do you agree with the intern’s decision to use an absorption format for her segmented income statement?

 

 

  Yes
  No

 

 

2-a. Based on the intern’s segmented income statement, can you determine how she allocated the company’s common fixed expenses to the Commercial and Residential segments?

 
 
  Commercial Residential
Common fixed expenses    

 

2-b. Do you agree with her decision to allocate the common fixed expenses to the Commercial and Residential segments?

 

 

  Yes
  No

 

3. Redo the intern’s segmented income statement using the contribution format.

 
 
Toxaway Company
Variable Costing Income Statement
  Total Company Commercial Residential
  $ $ $
Variable expenses:      
       
       
       
Total variable expenses      
       
       
    $ $
       
  $  

 

4. Compute the companywide break-even point in dollar sales. (Round intermediate calculations to 3 decimal places and final answer to the nearest whole dollar amount. Do not consider the CM ratio in percentages.)

 

 
 
Break-even point in dollar sales  

5. Compute the break-even point in dollar sales for the Commercial Division and for the Residential Division. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount. Do not consider the CM ratio in percentages.)

 
 
  Commercial Division Residential Division
Break-even point in dollar sales    

 

6. Assume the company decided to pay its sales representatives in the Commercial and Residential Divisions a total monthly salary of $23,000 and $46,000, respectively, and to lower its companywide sales commission percentage from 10% to 5%. Calculate the new break-even point in dollar sales for the Commercial Division and the Residential Division. (Round CM ratio to 2 decimal places and final answers to the nearest whole dollar amount. Do not consider the CM ratio in percentages.)

 

 
 
  Commercial Division Residential Division
Break-even point in dollar sales    
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Expert Answer

Step 1

1. As per general accepted accounting principles, the absorption method is followed in the preparation of financial statements which are reported by any company to outsiders. However, for internal decision making and analysis purpose, generally contribution format is followed.1. As per general accepted accounting principles, the absorption method is followed in the preparation of financial statements which are reported by any company to outsiders. However, for internal decision making and analysis purpose, generally contribution format is followed.

Step 2

2a.

Calculate the allocated common fixed cost.

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Commercial Residential Particulars Total Total selling and admin expenses (a) Variable selling and admin@10% of sales (b) Fixed cost (ca-b) Specific fixed cost (d) Allocated common fixed cost (c-d) 128,000 31,000 160,000 62,000 288,000 93,000 97,000 52,000 45,000 98,000 74.000 24,000 195,000 126.000 69,000

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Step 3

2b.

In determining the total overheads costs the c...

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