Assignment 5.1, Problem 9A2, page 375.

I have provided a table with some formulas. The numbers inside the cells are correct and should not be changed.

4	A	B	C	D	E	F	G	H	I	J	K
5
6	A	Company as a whole	Break down of 2 divisons		Break down of Waterloo Division			Break down of Cedar Rapids Division
7			waterloo divisions	Cedar rapids division	Not allocated	Downtown	Summer	Not allocated	Downtown	Solon	Airport
8
9	net sales	8,000	3,200				800 =B9*0.1		2,400 =B9*0.3
10	Variable costs:
11	Cost of merchandise sold (.4375)	3,500	1, 400 =C9*0.4375				350 =G9*0.4375		1,050 =I9*0.4375
12	Variable operating expenses	=SUM(C12:D12)	=SUM(I12:K12)			=F9*0.1			240 =I9*0.1		=K9*0.05
13	Total variable costs	=SUM(EB11:B12)				=SUM(F11:F12)	350=SUM(G11:G12)		1,290 =SUM(I11:I12)	0 =SUM(J11:J12)
14	Contribution margin	=B9-B13	=C9-C13			=F9-F13			1,110 =I9-I13		=K9-K13
15	Less: Fixed costs	335 =SUM(C15:D15)		335 =SUM(H15:K15)		125	40 =C20*0.25	210	125
16	controllable by
17	segment managers
18	= Contribution controllable			=D14-D15		=F14-F15				=J14-J15
19	by segment managers
20	Less: Fixed costs	490 =SUM(C20:D20)	140	350	35 =C20*0.25	70 =E20*0.5		70 =D20*0.2	70 =D20*0.2	105 =D20*0.3	105 =D20*0.3
21	controllable by others
22	Contribution by segment	=B18-B20		=D18-D20		=F18-F20		=H18-H20			=K18-K20
23
24	Less: Unallocated costs	110
25	Income before income	=B22-B24 should = 2300
26	taxes

9-A2 Contribution Approach to Responsibility Accounting Joe Albright owns and operates a small chain of convenience stores in Waterloo and Cedar Rapids. The company has five stores including a downtown store and a Sumner store in the Waterloo divi sion, and a downtown store, a Solon store, and an airport store in the Cedar Rapids division. There is also a separate adminstrative staff that provides market research, personnel, and accounting and finance services The company had the following financial results for 20X1 in thousands): Snles revenuc Cost of merchandise sold Gross margin Operating expenses Income before income taxes $8,000 3,500 4,500 2,200 The following data about 20X operations were also available 1. All five stores used the same pricing formula; therefore, all had the same gross margin percentage. 2. Sales were largest in the two downtown stores, with 30% of the total sales volume in each. The Solon and airport stores each provided 15% of total sales volume, and the Sumner store provided 10% 3. Variable operating costs at the stores were 10% of revenue for the downtown stores. The other stores had lower variable and higher fixed costs. Their variable operating costs were only 5% of sales revenue 4. The fixed costs over which the store managers had control were S125,000 in each of the down- town stores, $180,000 at Solon and airport, and $40,000 at Sumner 5. The remaining $910,000 of operating costs consisted of a. $210,000 controllable by the Cedar Rapids division manager but not by individual stores, b. $100,000 controllable by the Waterloo division manager but not by individual stores, and c. $600,000 controllable by the administrative staff 6. Of the $600,000 spent by the administrative staff, $350,000 directly supported the Cedar Rapids division, with 20% for the downtown store, 30% for each of the Solon and airport stores, and 20% for Cedar Rapids operations in general Another $140.000 supported the waterloo division, 50% for the downtown store, 25% for the Sumner store, and 25% supporting Waterloo operations in general. The other $110,000 was for general corporate expenses