Problem:
Michaels Company segments its income statement into its East and West Divisions. The company's overall sales, contribution margin ratio, and net operating income are $600,000, 60%, and $36,000, respectively. The West Division's contribution margin and contribution margin ratio are $180,000 and 75%, respectively. The East Division's segment margin is $50,000. The company has $90,000 of common fixed costs that cannot be traced to either division.
Required:
Question: Prepare an income statement for Michaels Company that uses the contribution format and is segmented by divisions.
Note: Please provide reasons to support your answer.