Segmented Income Statement Gorman Nurseries Inc. grows poinsettias and fruit trees in a green house/nursery operation. The following information was provided for the coming year. Poinsettias Fruit Trees Sales $970,000 $3,100,000 Variable cost of goods sold 460,000 1,630,000 Direct fixed overhead 160,000 200,000 A sales commission of 4% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $146,000 for the poinsettia line and $87,000 for the fruit tree line. Common fixed overhead for the nursery operation was estimated to be $800,000; common selling and administrative expense was estimated to be $450,000. Required: Prepare a segmented income statement for Gorman Nurseries for the coming year, using variable costing. Note: Enter all amounts as positive numbers except operating loss, if applicable.

Answer

A= Net operating loss = (924800)

B= Net operating profit = $9000

Explanation:                                                        A                               B  

                                                                    (Poinsettia)                 (Fruit tree)              

                                                                                   $                               $

Sales                                                                  =970000     ;           = 3100000

less: Variable cost of goods sold                    = (460000)  ;          =(1630000)

Gross contribution margin                                 510000     ;              1470000

Less: Selling expense (4% o sales)

    A (970000*4%)

   B(310000 *4%)                                               ( 38800)      ;            ( 124000)

 Contribution margin                                         471200     ;             1346000

Less: Fixed overheads                                     (800000)    ;           (800000)

                                                                         (328800)     ;            546000

less: Fixed Selling & admin expense             (146000)      ;            (87000)    

                                                                         (474800)     ;           (459000)

Less: Common selling and admin expense (450000)    ;            (450000)

Net operating income /( loss)                        (924800)     ;             9000                                                      

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