Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $960,000, 34%, and $19,200, respectively. The North Divisions contribution margin and contribution margin ratio are $121,600 and 38%, respectively. The South Division’s segment margin is $140,800. The company has $211,200 of common fixed expenses that cannot be traced to either division. Required:

Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions.

Income statement for Shannon Company that uses the contribution format and is segmented by divisions is attached with this answer please find it.

Explanation:

Contribution margin income statement is determines the contribution margin and Net income. Contribution margin is calculated after deducting variable costs from the revenue and the net income after deducting fixed expense from the contribution margin.

Overall

Sales Value is the sum of the sales of both North and South Segment.

Sales = $960,000

Contribution margin ratio = 34%

Net operating income = $19,200

North Divisions

Contribution margin $121,600

Contribution margin ratio 38%

As we know:

Contribution Margin ratio = Contribution margin / Sales

38% = $121,600 / Sales

Sales = $121,600 / 38% = $320,000

South Division

Margin $140,800.

Common fixed cost of $211,200 is deducted to calculate the net income.

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