a) At the Melbourne store, sales were 40 percent of southeastern district sales, while sales at the Chadstone and Frankston stores were 35 percent and 25 percent of district sales, respectively. The costs of goods sold in both Melbourne and the Chadstone was 42 percent of sales. Southeastern district sales revenue was $3,000,000, and its cost of goods sold amounted to $1,267,500.

b) Variable selling expenses (sales commissions) were 6 percent of sales for all stores, districts and regions while variable administrative expenses were 2.5 percent of sales for stores, districts and regions.

c) Maintenance costs include cleaning and repair services and are a direct costs for each store. The store manager has complete control over this outlay. Maintenance costs were incurred as follows: Melbourne, $15,000; Chadstone, $1,200; and Frankston $9,000.

d) The southeastern district spent $150,000 on advertising. Advertising is considered a direct cost or each store and is completely under the control of the store manager. The Melbourne store spent two-thirds of the southeastern district's total outlay for advertising, which was 10 times the amount spent in the Chadstone on advertising.

e) Southeastern district rental expenses amounted to $300,000. The rental expenses at the Melbourne store were 40 percent of the southeastern district's total, while the Chadstone store incurred 30 percent of the district total.

f) District expenses were allocated to the stores based on sales. General and administrative expense for the southeastern district amount to $360,000.

g) Victoria Region general and administrative expenses of $330,000 were allocated to the southeastern district. These expenses were, in turn, allocated equally to the district's three stores.

REQUIRED:

1. Maxie asked Angus to analyse the information provided by Moore. Taking Angus' position, present a segment profitability statement for the Southeastern Division, and for the Melbourne, Chadstone and Frankston stores. What is your recommendation to Maxie about the viability of acquiring E&E's Victoria Region?