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Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Sales Variable expenses Contribution margin Traceable fixed expenses: Advertising Selling and administrative Depreciation Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income Total Company R 4,335,000 2,002,750 2,332,250 Sales Traceable fixed expenses: 790,000 581,000 257,000 1,628,000 704,250 404,000 R 300,250 Advertising Selling and administrative Depreciation Variable expenses as a percentage of sales Divisions Cloth Leather R 2,550,000 R 1,785,000 1,100,000 1,450,000 440,000 350,000 129,000 919,000 R 531,000 R Top management can't understand why the Leather Division has such a low segment margin when its sales are only 30% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division: 902,750 882,250 Garments R500,000 350,000 231,000 128,000 709,000 173,250 Leather Division Product Lines Handbags R425,000 R 94,000 R 44,000 R 33,000 65% Shoes R860,000 R126,000 R 49,000 R 70,000 40% R130,000 R 51,000 R 25,000 55% Analysis shows that R87,000 of the Leather Division's selling and administrative expenses are common to the product lines. Required: 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines.

Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Sales Variable expenses Contribution margin Traceable fixed expenses: Advertising Selling and administrative Depreciation Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income Total Company R 4,335,000 2,002,750 2,332,250 Sales Traceable fixed expenses: 790,000 581,000 257,000 1,628,000 704,250 404,000 R 300,250 Advertising Selling and administrative Depreciation Variable expenses as a percentage of sales Divisions Cloth Leather R 2,550,000 R 1,785,000 1,100,000 1,450,000 440,000 350,000 129,000 919,000 R 531,000 R Top management can't understand why the Leather Division has such a low segment margin when its sales are only 30% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division: 902,750 882,250 Garments R500,000 350,000 231,000 128,000 709,000 173,250 Leather Division Product Lines Handbags R425,000 R 94,000 R 44,000 R 33,000 65% Shoes R860,000 R126,000 R 49,000 R 70,000 40% R130,000 R 51,000 R 25,000 55% Analysis shows that R87,000 of the Leather Division's selling and administrative expenses are common to the product lines. Required: 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management analysis
Section: Chapter Questions
Problem 16E
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Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Sales Variable expenses Contribution margin. Traceable fixed expenses: Advertising Selling and administrative Depreciation Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income Total Company R 4,335,000 2,002,750 2,332,250 Sales Traceable fixed expenses: R 790,000 581,000 257,000 1,628,000 Advertising Selling and administrative Depreciation Variable expenses as a percentage of sales 704,250 404,000 300,250 Divisions Cloth R 2,550,000 1,100,000 1,450,000 Top management can't understand why the Leather Division has such a low segment margin when its sales are only 30% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division: 440,000 350,000 350,000 231,000 129,000 128,000 919,000 709,000 R 531,000 R 173,250 Leather R 1,785,000 902,750 882, 250 Leather Division Product Lines Handbags R425,000 Garments R500,000 R 94,000 R 44,000 R 33,000 65% Shoes R860,000 R126,000 R 49,000 R 70,000 40% R130,000 R 51,000 R 25,000 55% Analysis shows that R87,000 of the Leather Division's selling and administrative expenses are common to the product lines. Required: 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines.
Transcribed Image Text:Severo S.A. of Sao Paulo, Brazil, is organized into two divisions. The company's contribution format segmented income statement (in terms of the Brazilian currency, the real, R) for last month is given below: Sales Variable expenses Contribution margin. Traceable fixed expenses: Advertising Selling and administrative Depreciation Total traceable fixed expenses Divisional segment margin Common fixed expenses Operating income Total Company R 4,335,000 2,002,750 2,332,250 Sales Traceable fixed expenses: R 790,000 581,000 257,000 1,628,000 Advertising Selling and administrative Depreciation Variable expenses as a percentage of sales 704,250 404,000 300,250 Divisions Cloth R 2,550,000 1,100,000 1,450,000 Top management can't understand why the Leather Division has such a low segment margin when its sales are only 30% less than sales in the Cloth Division. As one step in isolating the problem, management has directed that the Leather Division be further segmented into product lines. The following information is available on the product lines in the Leather Division: 440,000 350,000 350,000 231,000 129,000 128,000 919,000 709,000 R 531,000 R 173,250 Leather R 1,785,000 902,750 882, 250 Leather Division Product Lines Handbags R425,000 Garments R500,000 R 94,000 R 44,000 R 33,000 65% Shoes R860,000 R126,000 R 49,000 R 70,000 40% R130,000 R 51,000 R 25,000 55% Analysis shows that R87,000 of the Leather Division's selling and administrative expenses are common to the product lines. Required: 1. Prepare a contribution format segmented income statement for the Leather Division, with segments defined as product lines.
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