Segment Reporting – Example 1
Chapter 6
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
6-2
Example
Cairo Company sells three products, Product A,
Product B and Product C, and had sales of $1,000,000
during the month of June. The company's overall
contribution margin ratio was 37% and fixed expenses
totaled $340,000. Sales were: Product A, $500,000;
Product B, $300,000; and Product C, $200,000.
Traceable fixed costs were: Product A, $120,000;
Product B, $100,000; and Product C, $60,000. The
variable expenses of Product A were $300,000 and the
variable expenses of Product B were $180,000.
Required: Prepare a Complete segmented income
statement.
6-3
1-Design the following illustration
Company
Sales
- Variable costs
CM
-Traceable Fixed
Costs
Segment Margin
-Common Fixed
Costs
Net Operating
Income
A
B
C
6-4
2-set the given data:
Sales
Company
A
B
C
$1000,000
500,000
300,000
200,000
300,000
180,000
120,000
100,000
- Variable costs
CM
370,000
-Traceable Fixed Costs
300,000
Segment Margin
-Common Fixed Costs
Net Operating Income
Total Fixed Expenses =$340,000
60,000
6-5
3- Prepare the segmented Income
Statement :
Company
A
B
C
Sales
$1000,000
500,000
300,000
200,000
- Variable costs
630,000*
300,000
180,000
150,000**
CM
370,000
200,000
120,00
50,000
-Traceable Fixed Costs
280,000
120,000
100,000
60,000
Segment Margin
90,000
80,000
20,000
(10,000)
-Common Fixed Costs
60,000****
Net Operating Income
30,000
Total Fixed Expenses =$340,000
6-6
Explanations
• *CM=37%(given) X $1000,000 =$370,000
So, Variable costs=1000,000370,000=630,000
• **Variable costs for
B=630,000-(300,000+180,000)=150,000
• ***Segment Margin= CM- Traceable fixed costs
• ****Common fixed costs=340,000-280,000
=60,000
• Net Operating Income=90,000-60,000=30,000
6-7
The End