Question: Janitorial Products, Inc., manufactures two
Janitorial Products, Inc., manufactures two products, brooms and mops, which are sold in two territories designated by the company as East Territory and West Territory. The following income statement prepared for the company shows the product line segments. 
The territorial product sales are as follows: 
The direct fixed costs of brooms ($50,000) and mops ($150,000) are not identifiable with either of the two territories. The common fixed costs are partially identifiable with East Territory, West Territory, and the general administration as follows: East Territory . . . . . . . . . . . . . . . . . $ 54,000 West Territory . . . . . . . . . . . . . . . . 36,000 General administration . . . . . . . . 30,000 Total common fixed costs . . . $120,000 Required: 1. Prepare a segmented income statement by territories. The direct fixed costs of the product lines should be treated as common fixed costs on the segmented statement being prepared. 2. What is the significance of this analysis?
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Janitorial Products, Inc. Income Statement Total Brooms Mops Sales $1,000,000 $600,000 100% $400,000 100% Less variable expenses 600,000 $ 400,000 420,000 70 180,000 45 ... Contribution margin $180,000 30% $220,000 55% ...... Less direct fixed costs 200,000 50,000 150,000 Segment margin .. $ 200,000 $130,000 $ 70,000 Less common fixed costs 120,000 Net income $ 80,000
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