Question
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%).)
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