Segment Reporting
Minnesota Break Company bakes three products: donuts, bread and pastries. It sells them in cities of Minneapolis and St. Paul. For March, its first month of operation, the following income statement was prepared:
Minnesota Bread Company Territory and Company Income Statements For the Month of March
|
|
Minneapolis
|
St paul
|
Total
|
|
Sales
|
$2100
|
$500
|
$2600
|
|
Cost of goods sold
|
(1500)
|
(300)
|
(1800)
|
|
Gross profit
|
600
|
200
|
800
|
|
Selling and admin expenses
|
(400)
|
(225)
|
(625)
|
|
Net income
|
$200
|
$(25)
|
$175
|
Sales and selected variable expense data are as follows:
|
|
Donuts
|
Bread
|
Pasteries
|
|
Fixed baking expenses
|
$200
|
$140
|
$100
|
|
Variable baking expenses as a % of sales
|
50%
|
50%
|
60%
|
|
Variable selling expenses as a % of sales
|
4%
|
4%
|
6%
|
|
City of Minneapolis sales
|
$850
|
$900
|
$350
|
|
City of st paul sales
|
$200
|
$150
|
$150
|
The fixed selling expenses were $385 for March, of which $160 was a direct expense of the Minneapolis market and $225 was a direct expense of the St. Paul market. Fixed administration expenses were $130, which management has decided not to allocate when using the contribution approach.
REQUIRED
- A. Prepare a segment income statement showing the territory margin for each sales territory for March. Include a column for the entire firm.
- B. Prepare segment income statements showing the product margin for each product. Include a column for the entire firm.
- C. If the pastries line is dropped and fixed baking expenses do not change, what is the product margin for donuts and bread?
- D. What other type of segmentation might be useful to Minnesota Bread. Explain.