Question

The Foundational 15 [LO7-1, LO7-2, LO7-3, LO7-4, LO7-5][The following information applies to the questions displayed below.]Diego Company manufactures one product that is sold for $80 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 40,000 units and sold 35,000 units.Variable costs per unit:Manufacturing:Direct materials $ 24Direct labor $ 14Variable manufacturing overhead $ 2Variable selling and administrative $ 4Fixed costs per year:Fixed manufacturing overhead $ 800,000Fixed selling and administrative expense $ 496,000The company sold 25,000 units in the East region and 10,000 units in the West region. It determined that $250,000 of its fixed selling and administrative expense is traceable to the West region, $150,000 is traceable to the East region, and the remaining $96,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.Foundational 7-1313. Prepare a contribution format segmented income statement that includes a Total column and columns for the East and West regions.

Answer 1

Answer:

See attached file

Explanation:

To obtain sales, the quantity sold is multiplied by the sale price in each of the regions.

Variable costs are multiplied by each of the quantities

Fixed costs are distributed according to what the company determined

From the difference between sales and variable costs we get the Contribution Margin. If the fixed costs are subtracted, the Segment Margin of each sector is obtained. Subtracting fixed costs that cannot be distributed, gives the Net Income.

The Fixed manufacturing overhead $ 800,000 was distributed between 40.000 units (produced units) not 35.000 (sold units)