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P12.35 Business unit profit statement; responsibility accounting: retailer LO 12.6 Lakes Cakes makes and sells cakes through three retail stores in South Australia (Oaklands Park,
P12.35 Business unit profit statement; responsibility accounting: retailer LO 12.6 Lakes Cakes makes and sells cakes through three retail stores in South Australia (Oaklands Park, 12.7 Westlakes and the Adelaide central business district (CBD)). Lakes Cakes' corporate head office is located in Westlakes, in office space separate from its Westlakes store. A review of Lakes Cakes' profit statement indicates a record year in terms of overall sales and profit. However, Lakes Cakes' head office wants further information on individual store performance. Management has asked David Kumar, a newly hired accounting graduate, to prepare a profit statement that highlights profitability of each retail outlet. Kumar initially extracted the following information from Lakes Cakes' accounting records. Sales volume, sales price and purchase price data: Oaklands Park Westlakes Adelaide CBD Sales volume 74 000 82000 88 000 Unit selling price $12.00 $13.50 $13.50 Unit cost $3.00 $3.75 $ 5.25I The following expenses were incurred for sales commissions, local advertising. property taxes, management salaries and other non-controllable (but traceable) costs: Sales commissions 2% Adetaide CBD Local advertising $ 48 000 Local property taxes '36 18 000 Assistant manager's salary Store manager's salary $162 000 Other noncontrollable costs $ 50100 $ 53 700 $111600 Local advertising decisions are made at the store manager level. The assistant manager's salary at the Adelaide CBD store is determined by the store manager. In contrast, store managers' salaries are set by Lakes Cakes' head ofce. I Non-traceable xed corporate expenses total $865 350. I The company uses a respOnsibllity accounting system. Required 1. Assume the role of David Kumar and prepare a profit statement for Lakes Cakes that shows the profitability of each retail store. 2. Determine the weakest performing store and discuss probable causes of the weakest store's performance
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