Toxaway Company is a merchandiser with two divisions - Commercial and Residentiat The companys accounting intern was ashed to prepare segmented income statements the company's divisional managers sould use fo calculate their break-even points and make decisions; Stie took the prior month's. companywide income statement and prepared the absorption format segmented income stotement shown beiow: In prepering these statements, the intern determined Toxaway's only varlable soling and administrative expense is a sos sales commission on all salos. The company's total fixed experises include $79,500 of common flued expenses that will continue even if the Commerclat or Residential segment is discontinued, $60,000 of flxed expenses that will disappear if the Commercial sofjment is dropped, and $38.000 of fixed expenses that will disappear if the Residential segment is dropped. Required: 1. Do you agree with the intern's decisian to use an absorption format for her segmentod income statement? 2. Basod on a review of the intern's segmented incomestatement. a. How much of the company's common foxed expenses did she allocate to the Commerclal and Residential gegments? b. Which of the following three ellocation bases did she most likely uspd to alfocate comimon fixed expenses to the Comniercial and Residential. segments: (a) sales, (0) cost of goods sold, or (c) gross margin? 3. Do you agree with the imeris's decision to atjocate common fued expenses to the Commerciat and Residential seginents? 4. Redo the intern's segmented inconse statement using the cantribution format. 5. Compute the companywide breakedven point in dollar sales 6. Compute the break-even point In dollar sales for the Commercial Divislon and for the Rlesidential Division. 7. Assume the company decided to poy its sales iepresentatives in the Commerctal and Residensial Divisions a totat monthly salary of $16 ooo and $32,000, tespectvely, and to lower its companwide sales commission percentage from ton, to 5% Calculate tive new breaki even polat in dollar sales. for the Commerclat Division and the Residential Diviskon. Redo the intern's segmented income statement using the contribution format..

1. Toxaway Company is a merchandiser with two divisions - Commercial and Residentiat The
companys accounting intern was ashed to prepare segmented income statements the company's
divisional managers sould use fo calculate their break-even points and make decisions; Stie took
the prior month's. companywide income statement and prepared the absorption format
segmented income stotement shown beiow: In prepering these statements, the intern determined
Toxaway's only varlable soling and administrative expense is a sos sales commission on all
salos. The company's total fixed experises include $79,500 of common flued expenses that will
continue even if the Commerclat or Residential segment is discontinued, $60,000 of flxed
expenses that will disappear if the Commercial sofjment is dropped, and $38.000 of fixed
expenses that will disappear if the Residential segment is dropped. Required: 1. Do you agree
with the intern's decisian to use an absorption format for her segmentod income statement? 2.
Basod on a review of the intern's segmented incomestatement. a. How much of the company's
common foxed expenses did she allocate to the Commerclal and Residential gegments? b. Which
of the following three ellocation bases did she most likely uspd to alfocate comimon fixed
expenses to the Comniercial and Residential. segments: (a) sales, (0) cost of goods sold, or (c)
gross margin? 3. Do you agree with the imeris's decision to atjocate common fued expenses to
the Commerciat and Residential seginents? 4. Redo the intern's segmented inconse statement
using the cantribution format. 5. Compute the companywide breakedven point in dollar sales 6.
Compute the break-even point In dollar sales for the Commercial Divislon and for the
Rlesidential Division. 7. Assume the company decided to poy its sales iepresentatives in the
Commerctal and Residensial Divisions a totat monthly salary of $16 ooo and $32,000,
tespectvely, and to lower its companwide sales commission percentage from ton, to 5%
Calculate tive new breaki even polat in dollar sales. for the Commerclat Division and the
Residential Diviskon.
Redo the intern's segmented income statement using the contribution format.