Segment Reporting, balanced scorecard, cost of car, T-bones, break even
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Companhia Bradesco, S.A., of Brazil, an industrial supply store chain, has two divisions. The
company's contribution format income statement segmented by divisions for last year is given
below (the currency in Brazil is the real, denoted here by R):
Top management doesn't understand why the Glass Division has such a low segment margin
when its sales are only one-third less than sales in the Plastics Division. Accordingly, management
has directed that the Glass Division be further segmented into product lines. The following information
is available on the product lines in the Glass Division:
Analysis shows that R60,000 of the Glass Division's administration expenses are common to
the product lines.
Required:
1. Prepare a contribution format segmented income statement for the Glass Division with segments
defi ned as product lines.
2. Management is surprised by Specialty Glass's poor showing and would like to have the product
line segmented by market. The following information is available about the two markets in
which Specialty Glass is sold:
All of Specialty Glass's depreciation and administration expenses are common to the markets
in which the product is sold. Prepare a contribution format segmented income statement for
Specialty Glass with segments defi ned as markets.
3. Refer to the statement prepared in (1) above. The sales manager wants to run a special promotional
campaign on one of the products over the next month. A market study indicates that
such a campaign would increase sales of Flat Glass by R40,000 or sales of Auto Glass by
R30,000. The campaign would cost R8,000. Show computations to determine which product
line should be chosen.
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Solution Summary
Segment reporting and balanced scorecards are examined.
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