Show-off, Inc., sells merchandise through three retail outlets – in Las Vegas, Reno & Sacramento – and operates a general corporate headquarters in Reno. 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 Show-off’s accounting records: 

•The sales volume, sales price and purchase price data follow: 

                                               Las Vegas                Reno                     Sacramento 

Sales Volume                       37,000 units           41,000 units         46,000 units 

Unit selling price                 $12.00                     $11.00                   $9.50 

Unit Purchase price             5.50                          5.50                       6.00 

•The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other non-controllable (but traceable) costs: 

                                                           Las Vegas                 Reno                     Sacramento 

Sales Commissions                          6%                             6%                         6% 

Local Advertising                              $11,000                    $22,000                $48,000 

Local property taxes                        4,500                        2,000                    6,000 

Sales manager salary                        -                                -                           32,000 

Store manager salary                     31,000                     39,000                   38,000 

Other noncontrollable costs.          5,800                     4,600                      17,800 

Local advertising decisions are made at the store manager level. The sales manager’s salary in Sacramento is determined by the Sacramento store manager, in contrast, store manager salaries are set by Show-off’s Vice President. 

•Nontraceable fixed corporate expenses total $192,300

 •The company uses a responsibility accounting system. 

Required: 

1. Assume the role of Judson Wyatt and prepare a segmented income statement for show-off. 

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 Reno corporate headquarters and the company’s chief executive officer (CEO) desires to promote one of the three existing sore 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 your answer.