Requlred Informatlon

$[$The following information applies to the questions displayed below.$]$

Cardio World Incorporated $($CWI$)$ is a sporting goods retailer that specializes in bicycles, running shoes, and related

clothing. The firm has become successful by careful 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 Boston, Massachusetts. The total sales for the two stores for the most recent

year are $$6,990,000$ and $$5,840,000$ for the Hartford and Boston stores, respectively. Both stores are considered profit

centers, and within each store are two profit centers: one for clothing and the other for cycle and running shoes

$($called "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 $60\frac{\%}{40}\%$ for Hartford due to the greater interest in cycling in the Boston area. CWI is

interested in finding the profit contribution of clothing and cycle & run at the Harfford 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 are similar: $30\%$ of retail sales at Boston, and at Hartford, variable

operating costs are $25\%$ of retail sales for the clothing unit and $35\%$ for the cycle & run unit. CWI estimates it has a total of

$$1,175,000$ fixed cost, of which $$395,000$ cannot be traced to either store; of the remaining $$780,000,$$$440,000$ is

traceable to the stores and controllable by store managers, and $$340,000$ 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:

Requlred:

Prepare a contribution income statement for CWI showing the contribution margin, controllable margin, and contributiCardio World Incorporated $($CWI$)$ is a sporting goods retailer that specializes in bicycles, running shoes, and related clothing. The firm has become successful by careful 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$$s profitability. The company has two stores, one in Hartford, Connecticut, and the other in Boston, Massachusetts. The total sales for the two stores for the most recent year are $$6,990,000$ and $$5,840,000$ for the Hartford and Boston stores, respectively. Both stores are considered profit centers, and within each store are two profit centers: one for clothing and the other for cycle and running shoes $($called "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 due to the greater interest in cycling in the Boston area. CWI 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 are similar: $30\%$ of retail sales at Boston, and at Hartford, variable operating costs are $25\%$ of retail sales for the clothing unit and $35\%$ for the cycle & run unit. CWI estimates it has a total of $$1,175,000$ fixed cost, of which $$395,000$ cannot be traced to either store; of the remaining $$780,000,$ $$440,000$ is traceable to the stores and controllable by store managers, and $$340,000$ 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:

Fixed Controllable Costs Percent of Total Cost

Boston $45\%$

Hartford total $45$

Clothing $50$

Cycle & run $30$

Could not be traced to clothing or cycling at Hartford $20$

Could not be traced to Boston or Hartford $10$

Fixed Noncontrollable Costs Percent of Total Cost

Boston $40\%$

Hartford total $50$

Clothing $55$

Cycle & run $35$

Could not be traced to clothing or cycling at Hartford $10$

Could not be traced to Boston or Hartford $10$