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Managerial Accounting: The Corners...
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Managerial Accounting: The Corners...
Segmented Income Statement
Gorman Nurseries Inc. grows poinsettias and fruit trees in a green house/nursery operation. The following information was provided for the coming year.
A sales commission of 4% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $146,000 for the poinsettia line and $87,000 for the fruit tree line.
Common fixed overhead for the nursery operation was estimated to be $800,000; common selling and administrative expense was estimated to be $450,000.
Required:
Prepare a segmented income statement for Gorman Nurseries for the coming year, using variable costing.
Prepare a segmented income statement using variable costing.
Segmented Income Statement using Variable Costing:
Variable costing is used in the preparation of  segmented income statement. In this type of income statement, the variable expenses are recorded separately from the fixed expenses which are further divided into direct fixed expenses and common expenses.
The following table represents the segmented income statement of G Inc.:
| G Inc. | |||
| Segmented Income Statement | |||
| For the Coming Year | |||
| Â | Poinsettias ($) | Fruit Trees ($) | Total ($) |
| Sales | 970,000 | 3,100,000 | 4,070,000 |
| Less variable expenses: | Â | Â | Â |
| Variable cost of goods sold | 460,000 | 1,630,000 | 2,090,000 |
| Variable selling expense | 38,800 | 124,000 | 162,800 |
| Contribution margin | 471,200 | 1,346,000 | 1,817,200 |
| Less direct fixed expenses: | Â | Â | Â |
| Direct fixed overhead | 160,000 | 200,000 | 360,000 |
| Direct selling and administrative | 146,000 | 87,000 | 233,000 |
| Segment margin | 165,200 | 1,059,000 | 1,224,200 |
| Less common fixed expenses: | Â | Â | Â |
| Common fixed overhead | ďż˝... | ||
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