Show-Off, Inc., sells merchandise through three retail outlets-in Las Vegas, Reno, and 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: Reno Sacramento Las Vegas 37,100 units $ 19.00 Sales volume Unit selling price Unit purchase price 41, 100 units $ 17.50 46, 040 units $ 15.25 9.75 8.75 8.75 • The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other noncontrollable (but traceable) costs: , 美 Las Vegas 5% Sacramento 5% Reno Sales commissions 5% Local advertising Local property taxes Sales manager salary Store manager salaries Other noncontrollable costs $16,600 6, 800 $33,500 3,050 $75, e00 9,300 49,500 59, e00 27,700 47,000 8, 800 59, 50e 6,950 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 $293,450. •The company uses a responsibility accounting system.
Show-Off, Inc., sells merchandise through three retail outlets-in Las Vegas, Reno, and 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: Reno Sacramento Las Vegas 37,100 units $ 19.00 Sales volume Unit selling price Unit purchase price 41, 100 units $ 17.50 46, 040 units $ 15.25 9.75 8.75 8.75 • The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other noncontrollable (but traceable) costs: , 美 Las Vegas 5% Sacramento 5% Reno Sales commissions 5% Local advertising Local property taxes Sales manager salary Store manager salaries Other noncontrollable costs $16,600 6, 800 $33,500 3,050 $75, e00 9,300 49,500 59, e00 27,700 47,000 8, 800 59, 50e 6,950 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 $293,450. •The company uses a responsibility accounting system.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 31P
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Transcribed Image Text:Requlred:
1. Assume the role of Judson Wyatt and prepare a segmented income statement for Show-Off.
2. Identify the probable causes for the poor performance of the weakest store.
3. Which of the following should be reviewed in evaluating the performance of the store manager?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Assume the role of Judson Wyatt and prepare a segmented income statement for Show-Off. (Round your answers to the nearest whole
dollar.)
Show-Off, Inc.
Las Vegas
Reno
Sacramento
Variable operating expenses:
Total
Segment contribution margin
Fixed expenses controllable by segment manager:
Total
Profit margin controllable by segment manager
Fixed expenses traceable to segment, but controllable by
others:
Total
Segment profit margin
Transcribed Image Text:Show-Off, Inc., sells merchandise through three retail outlets-in Las Vegas, Reno, and 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 newiy 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:
Reno
Sacramento
Las Vegas
37,100 units
$ 19.00
8.75
Sales volume
Unit selling price
Unit purchase price
41, 100 units
$ 17.50
8.75
46, 040 units
$ 15.25
9.75
•The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other
noncontrollable (but traceable) costs:
Reno
Las Vegas
5%
Sacramento
5%
Sales commissions
5%
Local advertising
Local property taxes
Sales manager salary
Store manager salaries
Other noncontrollable costs
$75, 000
9,300
49, 500
59, 000
27,700
$16,600
6, 800
$33, 500
3,050
47, 000
8, 800
59,500
6,950
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 $293.450.
•The company uses a responsibility accounting system.
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