Question
Shown below are responsibility income statements for Butterfield, Inc., for the month of March. Investment Centers Butterfield, Inc Division 1 Division 2 Dollars % Dollars
Shown below are responsibility income statements for Butterfield, Inc., for the month of March. |
| Investment Centers |
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| Butterfield, Inc |
| Division 1 |
| Division 2 |
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| Dollars |
| % |
| Dollars |
| % |
| Dollars |
| % |
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Sales | $ | 460,000 |
| 100.00 | % |
| $ | 290,000 |
| 100 | % |
| $ | 170,000 |
| 100 | % |
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Variable costs |
| 225,000 |
| 48.91 |
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| 174,000 |
| 60 |
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| 51,000 |
| 30 |
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Contribution margin | $ | 235,000 |
| 51.09 | % |
| $ | 116,000 |
| 40 | % |
| $ | 119,000 |
| 70 | % |
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Fixed costs traceable to divisions |
| 142,500 |
| 30.98 |
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| 60,900 |
| 21 |
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| 81,600 |
| 48 |
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Division responsibility margin | $ | 92,500 |
| 20.11 | % |
| $ | 55,100 |
| 19 | % |
| $ | 37,400 |
| 22 | % |
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Common fixed costs |
| 50,000 |
| 10.87 |
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Income from operations | $ | 42,500 |
| 9.24 | % |
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| Profit Centers |
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| Division 1 |
| Product A |
| Product B |
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| Dollars |
| % |
| Dollars |
| % |
| Dollars |
| % |
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Sales | $ | 290,000 |
| 100 | % |
| $ | 116,000 |
| 100.00 | % |
| $ | 174,000 |
| 100.00 | % |
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Variable costs |
| 174,000 |
| 60 |
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| 52,200 |
| 45.00 |
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| 121,800 |
| 70.00 |
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Contribution margin | $ | 116,000 |
| 40 | % |
| $ | 63,800 |
| 55.00 | % |
| $ | 52,200 |
| 30.00 | % |
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Fixed costs traceable to products |
| 40,600 |
| 14 |
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| 12,180 |
| 10.50 |
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| 28,420 |
| 16.33 |
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Product responsibility margin | $ | 75,400 |
| 26 | % |
| $ | 51,620 |
| 44.50 | % |
| $ | 23,780 |
| 13.67 | % |
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Common fixed costs |
| 20,300 |
| 7 |
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Responsibility margin for division | $ | 55,100 |
| 19 | % |
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Instructions |
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 $40,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. (Omit the "$" sign in your response.) |
Expected change in responsibility margin | |
Product A | $ 19000 |
Product B | $ 9000 |
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e. | Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the monthly sales in Division 2 increase to $190,000 Organize this income statement in the format illustrated above, including columns for percentages. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) |
BUTTERFIELD, INC. Income Statement by Divisions For the Month Ended March 31 | ||||||
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| Divisions | |||
| Butterfield, Inc. | Division 1 | Division 2 | |||
| Dollars | Percent | Dollars | Percent | Dollars | Percent |
(Click to select)Fixed costs traceable to divisionsContribution marginSalesVariable costsCommon costs | $ |
| $ |
| $ |
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(Click to select)Variable costsCommon costsFixed costs traceable to divisionsSalesContribution margin |
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(Click to select)Variable costsContribution marginCommon costsFixed costs traceable to divisionsSales | $ |
| $ |
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(Click to select)Variable costsFixed costs traceable to divisionsSalesContribution marginCommon costs |
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Division responsibility margin | $ |
| $ |
| $ |
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(Click to select)Common costsVariable costsFixed costs traceable to divisionsContribution marginSales |
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Income from operations | $ |
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