Prepare a segment margin income statement for shoe shocks

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Reference no: EM131757749

Shoe Shock Innovations manufactures athletic shoe inserts that cushion the foot and reduce the impact of exercise on the joints. The company has two divisions, Sole Inserts and Heel Inserts. A segmented income statement from last month follows.

 

Sole Inserts
Division

 

 

Heel Inserts
Division

 

 

Total Shoe
Shock

 

 

Revenue

 

$496,000

 

 

$2,518,000

 

 

$3,014,000

 

 

Less variable expenses

 

316,000

 

 

2,037,000

 

 

2,353,000

 

 

Contribution margin

 

180,000

 

 

481,000

 

 

661,000

 

 

Less traceable fixed expenses

 

122,600

 

 

348,700

 

 

471,300

 

 

Segment margin

 

$57,400

 

 

$132,300

 

 

189,700

 

 

Common fixed costs

 

 

 

 

 

172,200

 

 

Net operating income

 

 

 

 

 

$17,500

 

 

Chris Kelly is Shoe Shock's sales manager. Although this statement provides useful information, Chris wants to know how well the company's two distribution channels, specialty footwear stores and drug stores, are performing. Marketing data indicates that 20% of sole inserts and 75% of heel inserts are sold through specialty footwear stores. A recent analysis of corporate fixed costs revealed that 50% of all fixed costs are traceable to specialty footwear stores and 45% of all fixed costs to drug stores.

Prepare a segment margin income statement for Shoe Shock's two distribution channels. (If the amount is negative then enter with a negative sign preceding the number e.g. -5,125 or parenthesis. e.g. (5,125).)

Based on your analysis, what recommendations would you make to the company?

Reference no: EM131757749

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