Music Teachers is an educational association for music teachers that has 20 000 members. The association operates from a central headquarters but has local membership chapters throughout the United States. Monthly meetings are held by the local chapters to discuss recent developments on topics of interest to music teachers. The association’s journal, Teachers’ 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 is presented below.

Music Teachers
Statement of revenues and expenses for the year ended 30 November


R3 275 000

Less expenses:


920 000

Personnel costs

230 000

Occupancy costs

280 000

Reimbursement of member costs to local chapters

600 000

Other membership services

500 000

Printing and paper

320 000

Postage and shipping

176 000

Instructors’ fees

80 000

General and administrative

38 000

Total expenses

3 144 000

Excess of revenues over expenses

R 131 000

The board of directors of Music Teachers has requested that a segmented statement of operations be prepared showing the contribution of each profit centre to the association. The association has four profit centres: Membership Division, Magazine Subscriptions Division, Books and Reports Division, and Continuing Education Division. Mike Doyle has been assigned responsibility for preparing the segmented statement, and he has gathered the following data prior to its preparation.

1. Membership dues are R100 per year, of which R20 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 (R20) should be assigned to the Magazine Subscription Division.

2. One-year subscriptions to Teachers’ Forum were sold to non-members and libraries at R30 per subscription. A total of 2 500 of these subscriptions were sold last year. In addition to subscriptions, the magazine generated R100 000 in advertising revenues. The costs per magazine subscription were R7 for printing and paper and R4 for postage and shipping.

3. 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 R25. Average costs per publication were R4 for printing and paper and R2 for postage and shipping.

4. The association offers a variety of continuing education courses to both members and non-members. The one-day courses had a tuition cost of R75 each and were attended by 2 400 students. A total of 1 760 students took two-day courses at a tuition cost of R125 for each student. Outside instructors were paid to teach some courses.

5. Salary costs and space occupied by division follow:


Space occupied (square metres)


210 000

2 000

Magazine Subscriptions

150 000

2 000

Books and Reports

300 000

3 000

Continuing Education

180 000

2 000

Corporate staff

80 000

1 000


R920 000

10 000

Personnel costs are 25% of salaries in the separate divisions as well as for the corporate staff. The R280,000 in occupancy costs includes R50,000 in rental cost for a warehouse used by the Books and Reports Division for storage purposes.

6. Printing and paper costs other than for magazine subscriptions and for books and reports relate to the Continuing Education Division.

7. General and administrative expenses include costs relating to overall administration of the association as a whole. The company’s corporate staff does some mailing of materials for general administrative 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 profit centres, will be treated as common costs. It is not necessary to distinguish between variable and fixed costs.


1. Prepare a segmented statement of revenues and expenses for Music Teachers. This statement should show the segment margin for each division as well as results for the association as a whole. (26)

2. Give arguments for and against allocating all costs of the association to the four divisions. (4)