Decentralisation and Segment Reporting
Sparky Electrical Services is organised into three divisions: Metro, Suburban and Regional. The company uses a responsibility accounting system to evaluate the performance of its divisions and divisional managers. Data for the divisions for the last year were as follows:
|
|
Metro
|
Suburban
|
Regional
|
|
Service revenue
|
$950,000
|
$750,000
|
$350,000
|
|
Variable expenses
|
150,000
|
100,000
|
50,000
|
|
Fixed expenses controllable by divisional manager
|
350,000
|
270,000
|
100,000
|
|
Fixed expenses traceable to division but controllable by others
|
180,000
|
150,000
|
40,000
|
In addition to the expenses listed above, the company had $450,000 of common fixed expenses which it allocated to each division based on their percentage of total service revenue earned.
Required
Prepare a segmented income statement for Sparky Electrical Services that highlights
the profitability/performance of the three divisions and the divisional managers.