Analysis of Profit and Loss by Department Edward, the Executive Vice President of the Banana Company, said: "We are still on the brink of danger." The Chief Accountant, Brian, said: "I know, it seems that way from the profit and loss statement in March. At least we can understand where our problems lie from this month's regional profit and loss statement. We can ignore Regions A and B and focus only on Region C." The report mentioned by Brian is shown below: The Banana Company is a zero-inventory business that sells a single product in three regions, as shown above. The following additional information pertains to the company: (a) Sales and administrative offices are centrally located and equidistant from each region. (b) Each region specifies the shipping method (truck, rail, or air) for delivery on sales orders, and all products are shipped from a central warehouse. Shipping costs are a variable cost and a direct cost for each region; the differences in revenue reflect different shipping methods. (c) All salespeople receive a base salary of $500 per month plus a commission of 6% of sales revenue. There are 20 salespeople in Region B and 16 in Region C. (d) Each regional manager must arrange his own regional advertising operations, while national advertising is provided by headquarters. (e) The cost of processing each order in any region is $5. In March, Region A had 3,000 orders, Region B had 1,500 orders, and Region C had 500 orders. Although the cost of processing each order of $5 is a variable cost and can be directly attributed to the respective region, this cost for March is included in the " TOTAL COMPANY ADMINISTRATIVE EXPENSES " mentioned above, and the remaining portion of administrative expenses is fixed and related to providing general administrative assistance to all departments of the company. (f) The inventory is minimal and can be disregarded. Try to complete: 1. CEO Mandy recently heard about contribution income statement at an industry conference and requested to reformat the income statement accordingly. Please prepare a contribution income statement as requested by Many, which should include the overall company and three regions. : The fixed costs should be divided into two parts: those that can be attributed to the region and those that cannot. Only deduct the part that can be attributed to the region under the marginal contribution to calculate the profit of each region. The part that cannot be attributed to the region indicates that it is beyond the control of the region. 2. Calculate the marginal contribution per order for each region. What does this calculation imply? 3. The manager of Region B intends to spend an additional $25,000 each month on a special promotion. If the result is an increase in sales revenue of $100,000, is this expense appropriate? 4. Analyze the data in the contribution income statement prepared in (1) and based on your analysis, point out the areas that management should be alerted to as much as possible