Buckeye Department Stores, Inc. operates a chain of department stores in Ohio. The companys organization chart appears below. Operating data for 20x1 follow.
Buckeye Department Stores incurs common fixed expenses of $120,000, which are not allocated to the two divisions. Income-tax expense for 20x1 is $2,900,000
Buckeye Department Stores Columbus Division Cleveland Division Olentangy Store Scioto Store Downtown Store Individual Stores Operating Data for 20x1 (in thousands) Columbus Division Olentangy Scioto Store Store Downtown Store $ 7,000 $ 2,900 $ 16,000 Cleveland Division (tota for all stores) $ 23,000 4,000 700 2,500 340 40 6,000 730 100 170 140 16,000 1,400 250 300 300 60 80 70 55 Sales revenue Variable expenses: Cost of merchandise sold Sales personnel-salaries Sales commissions Utilities Other Fixed expenses: Depreciation-buildings Depreciation-furnishings Computing and billing Warehouse Insurance Property taxes Supervisory salaries Security 120 100 60 60 30 490 340 210 470 250 50 60 240 160 85 210 100 90 420 90 60 55 160 30 220 120 30 930 260 The following fixed expenses are controllable at the divisional level: depreciation-furnishings, computing and billing, warehouse, insurance, and security. In addition to these expenses, each division annually incurs $40,000 of computing costs, which are not allocated to individual stores. The following fixed expenses are controllable only at the company level: depreciation-building, property taxes, and supervisory salaries. In addition to these expenses, each division incurs costs for supervisory salaries of $110,000, which are not allocated to individual stores. Buckeye Department Stores, Inc. Segments of Company Cleveland Columbus Division Division Segments of Columbus Division Olentangy Scioto Downtown Not Store Store Store Allocated $ $ $ $ 12,500 1,770 4,000 700 2,500 340 6,000 730 190 501 A0 100 310 265 $ 15,035 $ (15,035) 170 140 7,140 (7,140) 0 0 $ $ 0 0 70 4,900 (4,900) $ $ $ $ 2,995 (2,995) $ $ $ $ $ 280 $ 60 $ 60 $ mo 160 85 2101 320 50 Sales revenue Variable operating expenses: Cost of merchandise sold Sales personnel-salaries Sales commissions Utilities Other Total variable expenses Segment contribution margin Fixed expenses controllable by segment manager: Depreciation-furnishings Computing and billing Warehouse Insurance Security Total Profit margin controllable by segment manager Fixed expenses, traceable to segment, but controllable by others. Depreciation-buildings Property taxes Supervisory salaries Total Profit margin traceable to segment Common fixed expenses Income before taxes Income tax expense Net income 100 901 205601 150 30 $ 955 $ 260 $ (15,990) $ (5,160) 0 0 $ $ 0 0 $ $ 225 (3,220) $ $ 645 $ (7,785) $ $ $ $ $ $ 460 185 20 55 160 335 (5,495) 100 40 120 260 (3,480) 240 90 420 750 (8,535) 0 0 $ $ 0 0 $ 645 $ (16,635) $ $ $ $ $ $ $ $ $ 0
