90.2K

Verified Solution

Link Copied!

Assignment 5.1, Problem 9A2, page 375

Use in the information provided in the assignment to fill in the table. numbers provided are correct and should not be changed

1	A	B	C	D	E	F	G	H	I	J	K
2	A	Company as a whole	Break down of 2 divisons		Break down of Waterloo Division			Break down of Cedar Rapids Division
3			waterloo divisions	Cedar rapids division	Not allocated	Downtown	Summer	Not allocated	Downtown	Solon	Airport
4
5	net sales	8,000	3,200				800 =B5*0.1		2,400 =B5*0.3
6	Variable costs:
7	Cost of merchandise sold (.4375)	3,500	1, 400 =C5*0.4375				350 =G5*0.4375		1,050 =I5*0.4375
8	Variable operating expenses	=SUM(C8:D8)		=SUM(I8:K8)		=F5*0.1			240 =I9*0.1		=K5*0.05
9	Total variable costs	=SUM(B7:B8)				=SUM(F7:F8)	350=SUM(G7:G8)		1,290 =SUM(I7:I8)	0 =SUM(J7:J8)
10	Contribution margin	=B5-B9	=C5-C9			=F5-F9			1,110 =I5-I9		=K5-K9
11	Less: Fixed costs controllable by mangers	335 =SUM(C11:D11)		335 =SUM(H11:K11)		125	40	210	125
12	= Contribution controllable by segment managers			=D10-D11		=F10-F11				=J10-J11
13	Less: Fixed costs controllable by others	490 =SUM(C13:D13)	140	350	35 =C13*0.25	70 =E13*0.5	35 =C13*0.25	70 =D13*0.2	70 =D13*0.2	105 =D13*0.3	105 =D13*0.3
14	Contribution by segment	=B12-B13		=D12-D13		=F12-F13		=H12-H13			=K12-K13
15	Less: Unallocated costs	110
16	Income before income taxes	=B14-B15 should = 2300

9-A2 Contribution Approach to Responsibility Accounting Joe Albright owns and operates a small chain of convenience stores in Waterloo and Cedar Rapids. The company has five stores including a downtown store and a Sumner store in the Waterloo divi sion, and a downtown store, a Solon store, and an airport store in the Cedar Rapids division. There is also a separate adminstrative staff that provides market research, personnel, and accounting and finance services The company had the following financial results for 20X1 in thousands): Snles revenuc Cost of merchandise sold Gross margin Operating expenses Income before income taxes $8,000 3,500 4,500 2,200 The following data about 20X operations were also available 1. All five stores used the same pricing formula; therefore, all had the same gross margin percentage. 2. Sales were largest in the two downtown stores, with 30% of the total sales volume in each. The Solon and airport stores each provided 15% of total sales volume, and the Sumner store provided 10% 3. Variable operating costs at the stores were 10% of revenue for the downtown stores. The other stores had lower variable and higher fixed costs. Their variable operating costs were only 5% of sales revenue 4. The fixed costs over which the store managers had control were S125,000 in each of the down- town stores, $180,000 at Solon and airport, and $40,000 at Sumner 5. The remaining $910,000 of operating costs consisted of a. $210,000 controllable by the Cedar Rapids division manager but not by individual stores, b. $100,000 controllable by the Waterloo division manager but not by individual stores, and c. $600,000 controllable by the administrative staff 6. Of the $600,000 spent by the administrative staff, $350,000 directly supported the Cedar Rapids division, with 20% for the downtown store, 30% for each of the Solon and airport stores, and 20% for Cedar Rapids operations in general Another $140.000 supported the waterloo division, 50% for the downtown store, 25% for the Sumner store, and 25% supporting Waterloo operations in general. The other $110,000 was for general corporate expenses

Answer & Explanation Solved by verified expert

See Answer