1. (8 points) Pretty Lady is an upscale boutique that operates various stores throughout Florida. The company, which has three divisions (Miami, Naples, and Tampa), reported the following information for the year just ended (in thousands):

Pretty Lady also reported $600 of common fixed expenses that top management wants to allocate to the divisions on the basis of sales revenue. As the company's chief executive officer notes, "Each division helped to incur a portion of these costs and, as a result, each should absorb its fair share." The firm has adopted various responsibility accounting procedures to evaluate division personnel.

Required: A. Compute the company's total sales revenue.

B. Calculate the amount of variable operating expense incurred by the Naples Division.

C. Calculate the fixed costs controllable by Miami's management.

D. Calculate the fixed costs traceable to the Tampa Division but controllable by others.

E. Pretty Lady desires to promote a division manager to the corporate office to oversee selected operations. In determining which individual to promote, should Pretty Lady's top management focus on the profit margin controllable by the division manager or the overall divisional profit margin? Briefly explain.

F. If the company follows the desires of top management, how much of the common fixed expenses would be allocated to the Tampa Division?

G. Do cost allocations such as those in part "F" typically appear on a segmented income statement?

Sales revenue Divisional contribution margin Profit margin controllable by division manager Divisional profit margin Miami Naples $9,000 $6,000 6,400 4,400 1,500 1,900 1,000 700 Tampa $5,000 3,500 1,000 200