Problem 18-61 (Algo) Contribution Income Statement for Profit Centers [LO 18-3) The following information applies to the questions displayed below.) Cardio World Incorporated (CW is a sporting goods retailer that specializes in bicycles, running shoes, and related clothing. The firm has become successful by carelul attention to trends in cycling, running and changes in the technology and fashion of sport clothing In recent years, however, the profit margins have begun to fall and CWI has decided to employ a contribution income statement to further analyze the company's profitability. The company has two stores, one in Hartford, Connecticut, and the other in Roston, Massachusetts. The total sales for the two stores for the most recent year are $6.975,000 and $5,825 000 for the Hartford and Boston stores, respectively. Boty stores are considered profit centers, and within each store are two profit centers one for clothing and the other for cycle and running shoes (caled "cycle & run" below). The breakdown of sales within the two stores is approximately 50% clothing and 50% cycle & run for Boston but is estimated to be 60%/40% for Hartford Cue to the greater interest in cycling in the Boston area CMI is interested in finding the profit contribution of clothing and cycle & run at the Hartford store but not at the Boston store Cost of purchases for resale averages 60% of retail value at Boston, at Hartford, the cost is 70% for clothing and 50% for cycle & run Variable operating costs at each store ure similar, 30% of retail sales at Boston, and at I lartford, variable operating costs are 25% of retail sales for the clothing unt and 85% for the cycle & run unit CWI estimates It has a total of $1175,000 fixed cost of which $425,000 cannot be traced to either store of the remaining $750,000 $125000 is traceable to the stores and controllable by store managers and $325000 can be traced to the stores but cannot be controlled in the short term by the store managers. These fixed costs are estimated to be traceable to the stores as follows rixed controllable costs Boston Hartford total Clothing Cycle & run Could not be traced to clothing or cycling at Hartford Could not be trated to Boston on Hartford Percent of Total Cost 45% 15 58 RRRR Fixed Noncontrollable costs Baston Hartford total Clothing Cycle & run Could not be traced to clothing or cycline at Hartford Could not be traced to Boston om Hartford Percent of Total Cost 48% Se 55 35 10 10 Part 1 (Algo) Required: 1. Prepare a contribution income statement for CW showing the contribution margin, controllable margin, and contribution by profit center for both the Boston and Hartford stores, and also for the clothing and cycle & run units of the Hartford store. Combined Company Not Allocated Boston Hartford Not Allocated Clothing Cycle & Run Variable costs Total vanable costs 0 0 $ OS 0 3 0 $ 0 $ c) $ 0