Music Teacher’s Inc. is an educational association for music teachers that has 20,000 members. The association operates from a central HQ but has local membership chapters throughout the US. Monthly meetings are held by the local chapters to discuss recent development on topics of interest to music teachers. The association’s journal, Teacher’s Forum, is issued monthly with features about recent developments in the field. The association publishes books and reports and also sponsors professional courses that qualify for continuing professional education credit. The association’s statement of revenues and expenses for the current year are below:
Music Teachers Inc. Statement of Revenue & Expenses for the year ended Nov. 30
Revenues………………………………………………………………$3,275,000
Expenses:
Salaries………………………………………………………………..920,000
Personal costs………………………………………………………230,000
Occupancy costs…………………………………………………..280,000
Reimbursement of member cost to local chapters……..600,000
Other member services………………………………………….500,000
Printing and paper…………………………………………………320,000
Postage and shipping…………………………………………….176,000
Instuctors’ fees ……………………………………………………..80,000
General and admin………………………………………………..38,000
Total Expenses ……………………………………………………..3,144,000
Excess of Revenue over Expenses ………………………..$131,000
The board of directors of Music Teachers Inc. has requested that a segmented income statement be prepared showing the contribution of each segment to the association. The association has four segments: Membership Division, Magazine Subscription Division, Books and Reports Division, and Continuing Education Division. Mike Doyle has been assigned responsibility for preparing the segmented income statement and he has gathered the following data:
a. Membership dues are $100 per year, of which $20 is considered to cover a one year subscription to the association’s journal. Other benefits include membership in the association and chapter affiliation. The portion of the dues covering the magazine subscription ($20) should be assigned to the magazine subscription division.
b. One year subscription to the Teacher’s Forum were sold to members and libraries at $30 per subscription. A total of 2,500 of these subscriptions were sold last year. In addition to subscriptions, the magazine generated $100,000 in advertising revenue. The cost per magazine subscription were $7 for printing and paper and $4 for postage and shipping.
c. A total of 28,000 technical reports and professional texts were sold by the books and reports division at an average unit selling price of $25. Average costs per publication were $4 for printing and paper and $2 for postage and shipping.
d. The association offers a variety of continuing education courses to both members and non members. The one day course had a tuition cost of $75 each and were attended by 2,400 students. A total of 1,760 studentes took two day courses at a tuition cost of $125 for each student. Outside instructors were paid to teach some courses.
e. Salary costs and space occupied were as follows:
Salaries Space Occupied (sq. ft.)
Membership…………….. $210,000 2,000
Magazine Subscription..150,000 2,000
Books and reports ……..300,000 3,000
Continuing education…..180,000 2,000
Corporate staff …………..80,000 1,000
Total ……………………….$920,000 10,000
Personal costs are 25% of salaries in the seperate division as well as for the corporate staff. The $280,000 in occupancy costs includes $50,000 in rental cost for a warehouse used by the books and reports division for storage purposes.
f. Printing and paper costs other than for magazine subscriptions and for books and reports relate to the continuing educaiton division
g. General and admin expenses relate include costs related to overall admin of the association as a whole. The company’s corporate staff does some mailing of materials for general admin purposes.
The expenses that can be traced or assigned to the corporate staff, as well as any other expenses that are not traceable to the segments, will be treated as common costs, therefore not necessary to distinguish between variable and fixed costs.
REQUIRED
1. Prepare a contribution format segmented income statement for Music Teachers Inc. This statement should show the segment margin for each division as well as results for the association as a whole.
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