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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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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.

Chapter 8, Problem 18BEA, Segmented Income Statement Gorman Nurseries Inc. grows poinsettias and fruit trees in a green

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.

To determine

Prepare a segmented income statement using variable costing.

Explanation

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
 Poinsettias ($)Fruit Trees ($)Total ($)
Sales970,0003,100,0004,070,000
Less variable expenses:   
Variable cost of goods sold460,0001,630,0002,090,000
Variable selling expense38,800124,000162,800
Contribution margin471,2001,346,0001,817,200
Less direct fixed expenses:   
Direct fixed overhead160,000200,000360,000
Direct selling and administrative146,00087,000233,000
Segment margin165,2001,059,0001,224,200
Less common fixed expenses:   
Common fixed overhead�...

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