Glamour, Inc., is an upscale clothing store in New York City and London. Each store has two

Question:

Glamour, Inc., is an upscale clothing store in New York City and London. Each store has two main departments, Men’s Apparel and Women’s Apparel. Marie Phelps, Glamour’s CFO, wants to use strategic performance measurement to better understand the company’s financial results. She has decided to use the profit centers method to measure performance and has gathered the following information about the two stores and the two departments of the New York City store:

Total net sales ....................$2,250,000

Fixed costs

Partly traceable and controllable .......... 200,000

Partly traceable but noncontrollable......... 160,000

Nontraceable costs ................. 55,000

Total net sales (percent)

London Store .................. 40%

New York—Men’s Apparel ............. 30

New York—Women’s Apparel ........... 70

Cost of goods sold—variable (percent of sales)

London ..................... 55%

New York—Men’s Apparel ............. 60

New York—Women’s Apparel .......... 40

Variable operating costs (percent of sales)

London ..................... 34%

New York—Men’s Apparel ............. 24

New York—Women’s Apparel .......... 30

Fixed controllable costs—partly traceable (percent of total)

London .................... 40%

New York total ................. 40

Men’s Apparel .................. 45

Women’s Apparel ................ 40

Could not be traced to Men’s or Women’s apparel .... 15

Could not be traced to New York or London ...... 20

Fixed noncontrollable costs—partly traceable (percent of total)

London .................... 50%

New York total ................. 40

Men’s Apparel .................. 30

Women’s Apparel ................ 10

Could not be traced to Men’s or Women’s apparel .... 60

Could not be traced to London or New York ...... 10

Required

1. Using this information and a spreadsheet system, prepare a contribution income statement for Glamour, showing contribution margin, controllable margin, and contribution by profit center (CPC) for both the London and New York stores and for both departments of the New York store.

2. What are the global issues that are an important part of the profit center evaluation for Glamour Inc.?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...