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Problem 5-16 (continued)
3. The difference in the ending inventory relates to a difference in the
handling of fixed manufacturing overhead costs. Under variable costing,
these costs have been expensed in full as period costs. Under
Problem 5-19 (30 minutes)
1.
Sales Territory
Total Company
Central
Eastern
Amount
%
Amount
%
Amount
%
Sales ...............................................
$900,000
100.0
$400,000
100
$500,000
100
Variable expenses .............................
408,000
45.3
208,000
52
200,000
40
Contribution margin ..........................
492,000
54.7
192,000
48
300,000
60
Traceable fixed expenses ..................
290,000
32.2
160,000
40
130,000
26
Territorial segment margin ................
202,000
22.4
$ 32,000
8
$170,000
34
Common fixed expenses* .................
175,000
19.4
Net operating income .......................
$ 27,000
3.0
*465,000 – $290,000 = $175,000
Product Line
Central Territory
Awls
Pows
Amount
%
Amount
%
Amount
%
Sales ...............................................
$400,000
100.0
$100,000
100
$300,000
100
Variable expenses .............................
208,000
52.0
25,000
25
183,000
61
Contribution margin ..........................
192,000
48.0
75,000
75
117,000
39
Traceable fixed expenses ..................
114,000
28.5
60,000
60
54,000
18
Product line segment margin .............
78,000
19.5
$ 15,000
15
$ 63,000
21
Common fixed expenses* .................
46,000
11.5
Sales territory segment margin .........
$ 32,000
8.0
*$160,000 – $114,000 = $46,000
