Question

Fashionisto Inc. is an upscale clothing store in New York City and London. Each store has two main departments, Men’s Apparel and Women’s Apparel. Marie Phelps, Fashionisto’s CFO, wants to use strategic performance measurement to better understand the company’s financial results. She has decided to use the profit center method to measure performance and has gathered the following information about the two stores and the two departments of the New York City store:

Total net sales	$	4,200,000
Fixed costs
Partly traceable and controllable		285,000
Partly traceable but noncontrollable		255,000
Nontraceable costs		105,000
Total net sales (percent)
London store		40	%
New York store		60
New York—Men’s Apparel		40
New York—Women’s Apparel		60
Cost of goods sold—variable (percent of sales)
London store		52	%
New York—Men’s Apparel		45
New York—Women’s Apparel		60
Variable operating costs (percent of sales)
London store		36	%
New York—Men’s Apparel		22
New York—Women’s Apparel		32
Fixed controllable costs—partly traceable (percent of total)
London store		40	%
New York total		40
Men’s Apparel		45
Women’s Apparel		40
Could not be traced to Men’s or Women’s Apparel		15
Could not be traced to London or New York		20
Fixed noncontrollable costs—partly traceable (percent of total)
London store		50	%
New York total		40
Men’s Apparel		35
Women’s Apparel		15
Could not be traced to Men’s or Women’s Apparel		50
Could not be traced to London or New York		10

Required:

1. Using this information, prepare a contribution income statement for Fashionisto.

Answer 1

FASHIONISTO CONTRIBUTION MARGIN INCOME STATEMENT
	Total	Other	London	New York	New York
				Total	Men's Apparel	Women's Apparel	Other
Sales	4200000		4200000*40%=16800000	4200000*60%=2520000	2520000*40%=1008000	2520000*60%=1512000
Variable expense
Variable cost of sales	2234400		16800000*52%=873600	1360800	1008000*45%=453600	1512000*60%=907200
Variable operating cost	1310400		16800000*36%=604800	705600	1008000*22%=221760	1512000*32%=483840
Total variable expense	3544800		1478400	2066400	675360	1391040
contribution margin	655200		201600	453600	332640	120960
Traceable Fixed cost
Controllable and traceable	285000	285000*20%=57000	285000*40%=114000	285000*40%=114000	114000*45%=51300	114000*40%=45600	114000*15%=17100
Non controllable and Traceable	255000	255000*10%=25500	255000*50%=127500	255000*40%=102000	102000*35%= 35700	102000*15%=15300	102000*50%=51000
Total Traceable fixed cost	540000	82500	241500	216000	87000	60900	68100
segment margin	115200	-82500	-39900	237600	245640	60060	-68100
Less:Non Traceable fixed cost	105000
Net operating income	10200