Bill Jones,Flooring's Accountant,has Prepared the Following Income Statement for the Month

question 21

Essay

Bill Jones,Flooring's accountant,has prepared the following income statement for the month of May.
Residential Commercial Total
Sales revenue $2,760,000 $3,125,000 $5,885,000
Variable expenses 1,305,000 2,520,000 3,825,000
Contribution margin 1,455,000 605,000 2,060,000
Fixed expenses 645,000 615,000 1,260,000
Operating income $ 810,000 $ 10,000 $ 800,000
In preparing the income statement,Bill was unsure what to do with $240,000 in corporate fixed expenses that cannot be traced to a particular division.Since these costs were incurred to run the business as a whole,and he believed that each division benefited equally,he just allocated half to each division.
Required
a.How do you think Bill should have handled the $240,000 in corporate fixed expenses?
b.Prepare a segment margin income statement that highlights each division's contribution to corporate profits.

---

Definitions:

Subsequent Ratification

The act of officially approving or confirming a decision or agreement after it has already been made or implemented.

Principal's Identity

Information that discloses or specifies who the principal (the party for whom an agent acts) is in an agency relationship.

Legal Capacity

The ability of an individual or entity to enter into legally binding contracts, including the ability to sue and be sued, own property, and engage in other legal activities.

Unauthorized Acts

Actions taken by an individual or entity without legal or official approval, which may be illegal or against regulatory standards.