a) How are product-line trading profits calculated (Exhibit I)?

b) Are there any costs included in the trading profit that are not controllable by the product line managers? Are there any costs that should be included that are not part of the profit calculation? Summarize the strengths and weaknesses of the existing calculation of profitability.

Nel Sales X.XX Variable cost of sales Freight Public warehousing Manufacturing varlable costs Total variable cost of sales Variable profit contribution (contribution margin) X.MX Non variable cost of sales (fixed costs) Manufacturing (non-variable, fixed) Plant warehousing Other non-variable costs Total non variable cost of sales Delivered Profit X.XX X.MX X.XX Direct Marketing Expenses Advertising Sales promotion Marketing Services - direct Marketing write-offs Product group Selling direct Total direct marketing expenses Direct profit contribution X.XX Indirect Expenses Selling Marketing services Technical research Administrative Total indirert expenses New product development charge Trading Prolit Nel Sales X.XX Variable cost of sales Freight Public warehousing Manufacturing varlable costs Total variable cost of sales Variable profit contribution (contribution margin) X.MX Non variable cost of sales (fixed costs) Manufacturing (non-variable, fixed) Plant warehousing Other non-variable costs Total non variable cost of sales Delivered Profit X.XX X.MX X.XX Direct Marketing Expenses Advertising Sales promotion Marketing Services - direct Marketing write-offs Product group Selling direct Total direct marketing expenses Direct profit contribution X.XX Indirect Expenses Selling Marketing services Technical research Administrative Total indirert expenses New product development charge Trading Prolit