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Show-Off, Inc. sells merchandise through three retail outletsin Las Vegas, Reno, and Sacramentoand operates a general corporate headquarters in Reno. A review of the companys
Show-Off, Inc. sells merchandise through three retail outletsin Las Vegas, Reno, and Sacramentoand operates a general corporate headquarters in Reno. A review of the companys income statement indicates a record year in terms of sales and profits. Management, though, desires additional insights about the individual stores and has asked that Judson Wyatt, a newly hired intern, prepare a segmented income statement. The following information has been extracted from Show-Offs accounting records:
- The sales volume, sales price, and purchase price data follow:
Las Vegas | Reno | Sacramento | |||||||
Sales volume | 38,500 | units | 42,500 | units | 46,600 | units | |||
Unit selling price | $ | 33.00 | $ | 31.50 | $ | 29.25 | |||
Unit purchase price | 15.75 | 15.75 | 20.25 | ||||||
- The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other noncontrollable (but traceable) costs:
Las Vegas | Reno | Sacramento | |||||||
Sales commissions | 7 | % | 7 | % | 7 | % | |||
Local advertising | $ | 18,000 | $ | 40,500 | $ | 117,000 | |||
Local property taxes | 7,500 | 3,750 | 13,500 | ||||||
Sales manager salary | 70,500 | ||||||||
Store manager salaries | 54,000 | 73,500 | 87,000 | ||||||
Other noncontrollable costs | 10,200 | 7,650 | 41,700 | ||||||
- Local advertising decisions are made at the store manager level. The sales managers salary in Sacramento is determined by the Sacramento store manager; in contrast, store manager salaries are set by Show-Offs vice president.
- Nontraceable fixed corporate expenses total $363,450.
- The company uses a responsibility accounting system.
Required:
- Assume the role of Judson Wyatt and prepare a segmented income statement for Show-Off.
- Identify the probable causes for the poor performance of the weakest store.
- Which of the following should be reviewed in evaluating the performance of the store manager?
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