Question: Exercise 2 2 . 6 ( Algo ) Evaluation of Responsibility Centers and Center Managers ( LO 2 2 - 1 , LO 2 2
Exercise Algo Evaluation of Responsibility Centers and Center Managers LO LO
Shown as follows is a segmented income statement for DrexelHall during the current month:
DrexelHallProfit CentersStore Store Store DollarsDollarsDollarsDollarsSales$ $ $ $ Variable costsContribution margin$ $ $ $ Traceable fixed costs: controllablePerformance margin$ $ $ $ Traceable fixed costs: committedStore responsibility margin$ $ $ $ Common fixed costsIncome from operations$
All stores are similar in size, carry similar products, and operate in similar neighborhoods. Store was established first and was built at a lower cost than were Stores and This lower cost results in less depreciation expense for Store Store follows a policy of minimizing both costs and sales prices. Store follows a policy of providing extensive customer service and charges slightly higher prices than the other two stores.
Required:
Use the data given for DrexelHall to answer the following questions:
Assume that by spending an additional $ per month in advertising a particular store, DrexelHall can increase the sales of that store by percent. What would be the additional contribution margin added by each store if given the additional advertising?
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