The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other...

  

Transcribed Image Text:

The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other non-controllable (but traceable) costs: Oaklands Park Westlakes Adelaide CBD Sales commissions 2% 2% 2% Local advertising $16 000 $34 000 $70 000 Local property taxes $6 000 $4 000 $9 000 Assistant manager's salary $50 000 Store manager's salary $54 000 $56 000 $60 000 Other non-controllable costs $16 700 $17 900 $37 200 Local advertising decisions are made at the store manager level. The assistant manager's salary at the Adelaide CBD store is determined by the store manager. In contrast, store managers' salaries are set by Top Muffins' head office. Non-traceable fixed corporate expenses total $288 450. The company uses a responsibility accounting system. Required: 1. Assume the role of David Kumar and prepare a profit statement for Top Muffins that shows the profitability of each retail store. 2. Determine the weakest performing store and discuss probable causes of the weakest store's poor performance. 3. Assume that an opening has arisen at head office, and the company's CEO wants to promote one of the three existing store managers to the vacant position. Which of the following profit measures should the CEO use to evaluate each store manager's performance: contribution margin, profit margin controllable by the store manager, or a store's profit margin? Justify your answer. The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other non-controllable (but traceable) costs: Oaklands Park Westlakes Adelaide CBD Sales commissions 2% 2% 2% Local advertising $16 000 $34 000 $70 000 Local property taxes $6 000 $4 000 $9 000 Assistant manager's salary $50 000 Store manager's salary $54 000 $56 000 $60 000 Other non-controllable costs $16 700 $17 900 $37 200 Local advertising decisions are made at the store manager level. The assistant manager's salary at the Adelaide CBD store is determined by the store manager. In contrast, store managers' salaries are set by Top Muffins' head office. Non-traceable fixed corporate expenses total $288 450. The company uses a responsibility accounting system. Required: 1. Assume the role of David Kumar and prepare a profit statement for Top Muffins that shows the profitability of each retail store. 2. Determine the weakest performing store and discuss probable causes of the weakest store's poor performance. 3. Assume that an opening has arisen at head office, and the company's CEO wants to promote one of the three existing store managers to the vacant position. Which of the following profit measures should the CEO use to evaluate each store manager's performance: contribution margin, profit margin controllable by the store manager, or a store's profit margin? Justify your answer.

Answer rating: 100% (QA)

Local Advertising means advertising and promotion you undertake in media directed primarily in your local market area including television radio newsp... View the full answer