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Shown as follows are responsibility income statements for Butterfield, Inc., for the month of March. Investment Centers Butterfield, Inc Division 1 Division 2 Dollars %

Shown as follows are responsibility income statements for Butterfield, Inc., for the month of March.

Investment Centers
Butterfield, Inc Division 1 Division 2
Dollars % Dollars % Dollars %
Sales $ 480,000 100.00 % $ 320,000 100 % $ 160,000 100 %
Variable costs 240,000 50.00 192,000 60 48,000 30
Contribution margin $ 240,000 50.00 % $ 128,000 40 % $ 112,000 70 %
Fixed costs traceable to divisions 144,000 30.00 67,200 21 76,800 48
Division responsibility margin $ 96,000 20.00 % $ 60,800 19 % $ 35,200 22 %
Common fixed costs 40,000 8.33
Income from operations $ 56,000 11.67 %

Profit Centers
Division 1 Product A Product B
Dollars % Dollars % Dollars %
Sales $ 320,000 100 % $ 128,000 100.00 % $ 192,000 100.00 %
Variable costs 192,000 60 57,600 45.00 134,400 70.00
Contribution margin $ 128,000 40 % $ 70,400 55.00 % $ 57,600 30.00 %
Fixed costs traceable to products 44,800 14 13,440 10.50 31,360 16.33
Product responsibility margin $ 83,200 26 % $ 56,960 44.50 % $ 26,240 13.67 %
Common fixed costs 22,400 7
Responsibility margin for division $ 60,800 19 %

Required:

a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $3,000 per month and is expected to increase the sales of whichever product is advertised by $30,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised.

e. Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the monthly sales in Division 2 increase to $180,000.

Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the monthly sales in Division 2 increase to $180,000. (Round your percentage answers to 2 decimal place (i.e. 0.1234 should be considered as 12.34%).)

BUTTERFIELD, INC.
Responsibility Income Statement
For April
Butterfield, Inc. Division 1 Division 2
Dollars Percent Dollars Percent Dollars Percent
% % %
% % %
% % %
% % %
% % %
%
%

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