Piedmont Novelties, Inc., sells merchandise through three retail outlets€”in Raleigh, Charlotte, and Savannah€”and operates a general corporate headquarters in Charlotte. A review of the company€™s income statement indicates a record year in terms of sales and profits. Management, though, desires additional insights about the individual stores and has asked that Judson Wyatt, a newly hired intern, prepare a segmented income statement. The following information has been extracted from Piedmont€™s accounting records:
€¢ Sales volume, sales price, and purchase price data:

€¢ The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other noncontrollable (but traceable) costs:

Local advertising decisions are made at the store manager level. The sales manager€™s salary in Savannah is determined by the Savannah store manager; in contrast, store manager salaries are set by Piedmont Novelties€™s vice president.
€¢ Nontraceable fixed corporate expenses total $288,450.
€¢ The company uses a responsibility accounting system.

Required:
1. Assume the role of Judson Wyatt and prepare a segmented income statement for Piedmont.
2. Determine the weakest-performing store and present an analysis of the probable causes of poor performance.
3. Assume that an opening has arisen at the Charlotte corporate headquarters and the company€™s chief executive officer (CEO) desires to promote one of the three existing store managers. In evaluating the store managers€™ performance, should the CEO use a store€™s segment contribution margin, the profit margin controllable by the store manager, or a store€™s segment profit margin? Justify youranswer.

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Raleigh Charlotte Sales volume Unit selling price Unit purchase price Savannah 46,000 units $14.25 .. 37,000 units 41,000 units $16.50 $18.00 8.25 8.25 9.00 Raleigh Charlotte Savannah 6% 6% 6% $33,000 3,000 Local advertising Local property taxes.. Sales manager salary Store manager salaries Other noncontrollable costs 16,500 6,750 $72,000 9,000 48,000 57,000 26,700 58,500 6,900 8,700