Question

Fashionisto Inc. is an upscale clothing store in New York City and London. Each store has two main departments, Men’s Apparel and Women’s Apparel. Marie Phelps, Fashionisto’s CFO, wants to use strategic performance measurement to better understand the company’s financial results. She has decided to use the profit center method to measure performance and has gathered the following information about the two stores and the two departments of the New York City store:

Total net sales	$	4,500,000
Fixed costs
Partly traceable and controllable		300,000
Partly traceable but noncontrollable		270,000
Nontraceable costs		120,000
Total net sales (percent)
London store		40	%
New York store		60
New York—Men’s Apparel		40
New York—Women’s Apparel		60
Cost of goods sold—variable (percent of sales)
London store		52	%
New York—Men’s Apparel		45
New York—Women’s Apparel		60
Variable operating costs (percent of sales)
London store		36	%
New York—Men’s Apparel		22
New York—Women’s Apparel		32
Fixed controllable costs—partly traceable (percent of total)
London store		40	%
New York total		40
Men’s Apparel		45
Women’s Apparel		40
Could not be traced to Men’s or Women’s Apparel		15
Could not be traced to London or New York		20
Fixed noncontrollable costs—partly traceable (percent of total)
London store		50	%
New York total		40
Men’s Apparel		35
Women’s Apparel		15
Could not be traced to Men’s or Women’s Apparel		50
Could not be traced to London or New York		10

Required:

1. Using this information, prepare a contribution income statement for Fashionisto.

Answer 1

	London Store	New York Store	Not Allocated	Men's Wear	Woman's Wear	Not Allocated	Combined Company
Sales revenue	1,800,000	2,700,000	-	1,080,000	1,620,000	-	4,500,000
Variable cost
Cost of goods sold	936,000	1,458,000	-	486,000	972,000	-	2,394,000
Operating cost	648,000	756,000	-	237,600	518,400	-	1,404,000
Total variable cost	1,584,000	2,214,000	-	723,600	1,490,400	-	3,798,000
Contribution margin	216,000	486,000	-	356,400	129,600	-	702,000
Less: Controllable fixed costs	120,000	120,000	60,000	54,000	48,000	18,000	300,000
Controllable margin	96,000	366,000		302,400	81,600		402,000
Less: Noncontrollable fixed costs	135,000	108,000	27,000	37,800	16,200	54,000	270,000
Contribution by profit center	-            39,000	258,000	-             87,000	264,600	65,400	-             72,000	132,000
Less: Nontraceable costs							120,000
Net income							12,000

Please refer detailed sheet for calculation understanding and clarity