Cardio World Inc. (CWI) is a sporting goods retailer that specializes in bicycles, running shoes, and related clothing. The firm has become successful by careful attention to trends in cycling, running, and changes in the technology and fashion of sport clothing. In recent years, however, the profit margins have begun to fall, and CWI has decided to employ a contribution income statement to further analyze the company’s profitability. The company has two stores, one in Hartford, Connecticut, and the other in Boston, Massachusetts. The total sales for the two stores for the most recent year are $6,945,000 and $5,795,000 for the Hartford and Boston stores, respectively. Both stores are considered profit centers, and within each store are two profit centers: one for clothing and the other for cycle and running shoes (called "cycle & run" below). The breakdown of sales within the two stores is approximately 50% clothing and 50% cycle & run for Boston but is estimated to be 60%/40% for Hartford due to the greater interest in cycling in the Boston area. CWI is interested in finding the profit contribution of clothing and cycle & run at the Hartford store but not at the Boston store.
Cost of purchases for resale averages 60% of retail value at Boston; at Hartford, the cost is 70% for clothing and 50% for cycle & run. Variable operating costs at each store are similar: 30% of retail sales at Boston, and at Hartford, variable operating costs are 25% of retail sales for the clothing unit and 35% for the cycle & run unit. CWI estimates it has a total of $1,175,000 fixed cost, of which $485,000 cannot be traced to either store; of the remaining $690,000, $395,000 is traceable to the stores and controllable by store managers, and $295,000 can be traced to the stores but cannot be controlled in the short term by the store managers. These fixed costs are estimated to be traceable to the stores as follows:
Fixed Controllable Costs | Percent of Total Cost |
||
Boston | 45 | % | |
Hartford total | 45 | ||
Clothing | 50 | ||
Cycle & run | 30 | ||
Could not be traced to clothing or cycling at Hartford | 20 | ||
Could not be traced to Boston or Hartford | 10 | ||
Fixed Noncontrollable Costs | Percent of Total Cost |
||
Boston | 40 | % | |
Hartford total | 50 | ||
Clothing | 55 | ||
Cycle & run | 35 | ||
Could not be traced to clothing or cycling at Hartford | 10 | ||
Could not be traced to Boston or Hartford | 10 | ||
Required:
1. Prepare a contribution income statement for CWI showing the contribution margin, controllable margin, and contribution by profit center for both the Boston and Hartford stores, and also for the clothing and cycle & run units of the Hartford store.
combined company | not allocated | boston | hartford | not allocated | clothing | cycle & run | |
sales | |||||||
variable cost | |||||||
total variable cost | |||||||
operating income |
Cardio World Inc. (CWI) is a sporting goods retailer that specializes in bicycles, running shoes, and...
Cardio World Inc. (CWI) is a sporting goods retailer that specializes in bicycles, running shoes, and related clothing. The firm has become successful by careful attention to trends in cycling, running, and changes in the technology and fashion of sport clothing. In recent years, however, the profit margins have begun to fall, and CWI has decided to employ a contribution income statement to further analyze the company's profitability. The company has two stores, one in Hartford, Connecticut, and the other...
Required information (The following information applies to the questions displayed below.) Cardio World Inc. (CWI) is a sporting goods retailer that specializes in bicycles, running shoes, and related clothing. The firm has become successful by careful attention to trends in cycling, running, and changes in the technology and fashion of sport clothing. In recent years, however, the profit margins have begun to fall, and CWI has decided to employ a contribution income statement to further analyze the company's profitability. The...
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 $ 4,100,000 Fixed costs...
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...
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 $ 4,400,000 Fixed costs...
Extreme Sporting Goods is a retailer of sporting equipment. Last year, Extreme Sporting Goods' sales revenues totalled $6,500,000. Total expenses were $1,730,000. Of this amount, approximately $1,025,000 were variable, while the remainder were fixed. Since Extreme Sporting Goods offers thousands of different products, its managers prefer to calculate the break-even point in terms of sales dollars rather than units. Assume that Extreme Sporting Goods gathers information on the sales of its products based on two departments: Winter Sports and Summer...
Slippers Inc. produces and sells shoes in chain stores. Company sells 10 kinds of cheap shoes with similar costs and selling prices. Each store has a manager working for a salary. Each salesperson is paid salary plus a sales Premium. Company pays extra 1 TL premium to sales person and 1 TL to manager for each pair of shoes sold beyond BEP. Company is to decide whether to open up or not a new store. Budgeted revenue and costs are...
Buckeye Department Stores, Inc. operates a chain of department
stores in Ohio. The company’s organization chart appears below.
Operating data for 20x1 follow.
BUCKEYE DEPARTMENT STORES, INC.
Operating Data for 20x1
(in thousands)
Columbus Division
Olentangy Store
Scioto Store
Downtown Store
Cleveland Division (total for all stores)
Sales revenue
$
8,000
$
2,600
$
14,000
$
20,000
Variable expenses:
Cost of merchandise sold
5,000
2,200
7,000
13,000
Sales personnel—salaries
600
310
760
1,600
Sales commissions
70
40
110
240
Utilities...
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3. Production costs...
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