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