Question: Exercise 2 2 . 6 ( Algo ) Evaluation of Responsibility Centers and Center Managers ( LO 2 2 - 1 , LO 2 2

Exercise 22.6(Algo) Evaluation of Responsibility Centers and Center Managers (LO22-1, LO22-2)
Shown as follows is a segmented income statement for Drexel-Hall during the current month:
Drexel-HallProfit CentersStore 1Store 2Store 3Dollars%Dollars%Dollars%Dollars%Sales$ 2,085,000100%$ 695,000100%$ 695,000100%$ 695,000100%Variable costs1,251,00060430,90062437,85063382,25055Contribution margin$ 834,00040%$ 264,10038%$ 257,15037%$ 312,75045%Traceable fixed costs: controllable500,40024139,00020118,15017243,25035Performance margin$ 333,60016%$ 125,10018%$ 139,00020%$ 69,50010%Traceable fixed costs: committed208,5001055,600876,4501176,45011Store responsibility margin$ 125,1006%$ 69,50010%$ 62,5509%$ (6,950)(1)%Common fixed costs45,5002Income from operations$ 79,6004%
All stores are similar in size, carry similar products, and operate in similar neighborhoods. Store 1 was established first and was built at a lower cost than were Stores 2 and 3. This lower cost results in less depreciation expense for Store 1. Store 2 follows a policy of minimizing both costs and sales prices. Store 3 follows a policy of providing extensive customer service and charges slightly higher prices than the other two stores.
Required:
Use the data given for Drexel-Hall to answer the following questions:
Assume that by spending an additional $18,800 per month in advertising a particular store, Drexel-Hall can increase the sales of that store by 10 percent. What would be the additional contribution margin added by each store if given the additional advertising?

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