Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Bettys Fashions operates retail stores in both downtown and suburban locations. The company has two responsibility centers: the City Division, which contains stores in downtown

Bettys Fashions operates retail stores in both downtown and suburban locations. The company has two responsibility centers: the City Division, which contains stores in downtown locations, and the Mall Division, which contains stores in suburban locations. Bettys CEO is concerned about the profitability of the City Division, which has been operating at a loss for the last several years. The most recent City Division income statement follows. The CEO has asked for your advice on shutting down the City Divisions operations. If the City Division is eliminated, corporate administration is not expected to change, nor are any other changes expected in the operations or costs of the Mall Division.

BETTY'S FASHIONS, CITY DIVISION Divisional Income Statement For the Year Ending January 31
Sales revenue $ 4,500,000
Costs
AdvertisingCity Division 177,000
Cost of goods sold 2,350,000
Divisional administrative salaries 292,000
Selling costs (sales commissions) 582,000
Rent 737,000
Share of corporate administration 477,000
Total costs $ 4,615,000
Net loss before income tax benefit $ (115,000 )
Tax benefit at 40% rate 46,000
Net loss $ (69,000 )

Required:

  1. Using the worksheet below, determine which revenues and costs are probably differential for the decision to discontinue City Division's operations.
  2. What will be the effect on Bettys profits if the division is eliminated?

Using the worksheet below, determine which revenues and costs are probably differential for the decision to discontinue City Division's operations.

image text in transcribedimage text in transcribed

Required A Required B Using the worksheet below, determine which revenues and costs are probably differential for the decision to discontinue City Division's operations. Betty's Fashions, City Division Divisional Income Statement Differential Revenues and Costs For the Year Ending January 31 Sales revenue Costs Advertising - City division Cost of goods sold Divisional administrative salaries Selling costs (sales commissions) Rent Share of corporate administration Total costs Complete this question by entering your answers in the tabs below. Required A Required B What will be the effect on Betty's profits if the division is eliminated? Betty's profits will by

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Glencoe Accounting Concepts Procedures Applicatons

Authors: McGraw-Hill Education

3rd Edition

0028036174, 978-0028036175

More Books

Students also viewed these Accounting questions

Question

List one of the facultys publications in APA style.

Answered: 1 week ago