Fashionisto 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, Fashionisto's CFO, wants to use strategic performance measurement to better understand the company's financial results. She has decided to use the profit center 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..............................................................................$3,500,000

Fixed costs

Partly traceable and controllable..............................................................250,000

Partly traceable but noncontrollable..........................................................220,000

Nontraceable costs..............................................................................70,000

Total net sales.................................................................................(percent)

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

New York store......................................................................................60

New York-Men's Apparel.........................................................................40

New York-Women's Apparel.....................................................................60

Cost of goods sold-variable (percent of sales)

London store........................................................................................52%

New York-Men's Apparel..........................................................................45

New York-Women's Apparel.....................................................................60

Variable operating costs (percent of sales)

London store..............................................................................................36%

New York-Men's Apparel...............................................................................22

New York-Women's Apparel............................................................................32

Fixed controllable costs-partly traceable (percent of total)

London store.....................................................................................................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 London or New York....................................................................20

Fixed noncontrollable costs-partly traceable (percent of total)

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

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

Men's Apparel.................................................................................................................35

Women's Apparel............................................................................................................15

Could not be traced to Men's or Women's Apparel..........................................................50

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

Required

1. Using this information, prepare a contribution income statement for Fashionisto, showing contribution margin, controllable margin, and contribution by profi t center (CPC) for both the London and New York stores and for both departments of the New York store. Using Excel is highly recommended for this problem; Excel can improve accuracy and allows for easy assessment of changed assumptions.

2. What are the global issues that are an important part of the profi t center evaluation for Fashionisto, Inc.?