Managerial Accounting: MBA309
Group Case
Hervias,Mark Matthew C.
Taglucop, Susana
Oliveres, Aizel Mae
Tan, ,Edgelyn Grace
Villaruz , Kristin Nicole
Date Submitted: April 17, 2021
Question No 1.
Music Teacher's Inc.
Segmented Income Statement
For the Year Ended November 30
Division
Magazine Books Continuin
Membershi
Subscriptio & g Total
p
n Reports Education
Revenue
$2,000,00
Membership Dues $1,600,000 $400,000
0
Non-member Magazine
75,000 75,000
Subscriptions
Advertising 100,000 100,000
Report and Texts 700,000 700,000
Continuing Education
400,000 400,000
Courses
Total Revenue 1,600,000 575,000 700,000 400,000 3,275,000
Less Expenses
Salaries 210,000 150,000 300,000 180,000 840,000
Personnel Costs 52,500 37,500 75,000 45,000 210,000
Occupancy Costs 46,000 46,000 119,000 46,000 257,000
Reimbursement of
Member Costs to Local 600,000 600,000
Chapters
Other Membership
500,000 500,000
Services
Printing and Paper
157,500 112,000 50,500 320,000
Costs
Postage and Shipping
90,000 56,000 146,000
Costs
Instructors' Fees 80,000 80,000
Total Traceable
1,408,500 481,000 662,000 401,500 2,953,000
Expenses
Division Segment Margin $191,500 $94,000 $38,000 $(1,500) $322,000
Managerial Accounting: MBA309
Group Case
Hervias,Mark Matthew C.
Taglucop, Susana
Oliveres, Aizel Mae
Tan, ,Edgelyn Grace
Villaruz , Kristin Nicole
Date Submitted: April 17, 2021
Less Common Expenses not
Traceable to Divisions
Salaries - Corporate
80,000
Staff
Personnel Costs 20,000
Occupancy Costs 23,000
Posting and Shipping
30,000
Costs
General And
38,000
Administrative
Total Common
191,000
Expenses
Excess of Revenues over
$131,000
Expenses
Solutions:
Revenues
Membership dues (20,000 x $100) $2,000,000
Assigned to Magazine Subscription Division (20,000 x $20) (400,000)
Assigned to Membership Division 1,600,000
Non-member Magazine Subscription (2,500 x $30) $75,000
Technical Reports and Professional Texts (28,000 x $25) $700,000
One-day Courses (2,400 x $75) $180,000
Two-day Courses (1,760 x $125) 220,000
Total Continuing Education Courses $400,000
Salaries and Personnel Cost
Salaries x 25% = Personnel
Costs
Membership Division $210,000 $52,500
Magazine Subscriptions Division 150,000 37,500
Books and Reports Division 300,000 75,000
Managerial Accounting: MBA309
Group Case
Hervias,Mark Matthew C.
Taglucop, Susana
Oliveres, Aizel Mae
Tan, ,Edgelyn Grace
Villaruz , Kristin Nicole
Date Submitted: April 17, 2021
Continuing Education Division 180,000 45,000
Total Assigned to Divisions 840,000 210,000
Corporate Staff 80,000 20,000
Total Salaries and Personnel Cost $920,000 $230,000
Occupancy Costs
Membership Division ($230,000 x 0.2) $46,000
Magazine Subscriptions Division ($230,000 x 0.2) 46,000
Books and Reports Division [($230,000 x 0.30)+$50,000] 119,000
Continuing Education Division ($230,000 x 0.2) 46,000
Corporate Staff ($230,000 x 0.1) 23,000
Total Occupancy Costs 280,000
Printing and Paper Costs $320,000
Magazine Subscriptions Division (22,500 x $7) (157,000)
Books and Reports Division (28,500 x $4) (112,000)
Continuing Education Division $50,500
Postage and Shipping Costs $176,000
Magazine Subscriptions Division (22,500 x $4) (90,000)
Books and Reports Division (28,500 x $2) (56,000)
Corporate Staff $30,000
Question No. 2
Although we don’t agree on the distribution of common costs to segments, the most
common reason given for this practice is the segment managers must be aware that
the common costs do not occur and must be covered.
Arguments against allocation of all costs:
1. Allocation bases will need to be chosen illogically since no cause-and-effect
relationship exists between common costs and the segments to which they are
distributed.
2. Management may be misinformed into excluding a profitable segment that
seems to be unprofitable because of allocated common costs
Managerial Accounting: MBA309
Group Case
Hervias,Mark Matthew C.
Taglucop, Susana
Oliveres, Aizel Mae
Tan, ,Edgelyn Grace
Villaruz , Kristin Nicole
Date Submitted: April 17, 2021
3. Segment managers typically have a little control over common costs. They
would not be held accountable for costs over which they have no control.
4. Allocations of common costs weaken the credibility of performance reports.
Segment managers may resent such allocations and overlook the entire
performance report as illogical and unfair.
