Question

In: Accounting

Show-Off, Inc. sells merchandise through three retail outlets—in Las Vegas, Reno, and Sacramento—and operates a general...

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:
Las Vegas Reno Sacramento
Sales volume 39,000 units 43,000 units 46,800 units
Unit selling price $ 38.00 $ 36.50 $ 34.25
Unit purchase price 18.25 18.25 24.00
  • The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other noncontrollable (but traceable) costs:
Las Vegas Reno Sacramento
Sales commissions 8 % 8 % 8 %
Local advertising $ 18,500 $ 43,000 $ 132,000
Local property taxes 7,750 4,000 15,000
Sales manager salary 78,000
Store manager salaries 56,500 78,500 97,000
Other noncontrollable costs 10,700 7,900 46,700
  1. 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 $388,450.
  • The company uses a responsibility accounting system.

Required:

  1. Assume the role of Judson Wyatt and prepare a segmented income statement for Show-Off. Please fill in the chart I have provided, thank you!

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
Sales revenue
Variable operating expenses:
Sales commissions
Cost of goods sold
Total $0 $0 $0 $0
Segment contribution margin $0 $0 $0 $0
Fixed expenses controllable by segment manager:
Local advertising
Sales manager salary
Total $0 $0 $0 $0
Profit margin controllable by segment manager $0 $0 $0 $0
Fixed expenses traceable to segment, but controllable by others:
Local property taxes
Other noncontrollable costs
Store manager salaries
Total $0 $0 $0 $0
Segment profit margin $0 $0 $0 $0
Common fixed expenses
Operating income $0

Solutions

Expert Solution

Show-Off, Inc. Las Vegas Reno Sacramento
Sales revenue $        4,654,400.00 $   1,482,000.00 $   1,569,500.00 $    1,602,900.00
Variable operating expenses:
Sales commissions $           372,352.00 $       118,560.00 $       125,560.00 $        128,232.00
Cost of goods sold $        2,619,700.00 $       711,750.00 $       784,750.00 $    1,123,200.00
Total $        2,992,052.00 $       830,310.00 $       910,310.00 $    1,251,432.00
Segment contribution margin $        1,662,348.00 $       651,690.00 $       659,190.00 $        351,468.00
Fixed expenses controllable by segment manager:
Local advertising $           193,500.00 $         18,500.00 $         43,000.00 $        132,000.00
Sales manager salary $             78,000.00 $                       -   $                       -   $          78,000.00
Total $           271,500.00 $         18,500.00 $         43,000.00 $        210,000.00
Profit margin controllable by segment manager $        1,390,848.00 $       633,190.00 $       616,190.00 $        141,468.00
Fixed expenses traceable to segment, but controllable by others:
Local property taxes $             26,750.00 $           7,750.00 $           4,000.00 $          15,000.00
Other non-controllable costs $             65,300.00 $         10,700.00 $           7,900.00 $          46,700.00
Store manager salaries $           232,000.00 $         56,500.00 $         78,500.00 $          97,000.00
Total $           324,050.00 $         74,950.00 $         90,400.00 $        158,700.00
Segment profit margin $        1,066,798.00 $       558,240.00 $       525,790.00 $        (17,232.00)
Common fixed expenses $           388,450.00
Operating income $           678,348.00

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