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