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	$	4,100,000
Fixed costs
Partly traceable and controllable		280,000
Partly traceable but noncontrollable		250,000
Nontraceable costs		100,000
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

	Combined Company	Not Allowed	London Store	New York Store	Not Allowed	Men's Wear	Women's Wear
Sales	$4,100,000	$0	$1,640,000	$2,460,000	$0	$984,000	$1,476,000
Variable Costs:
Cost of Goods Sold	$2,181,200	$0	$852,800	$1,328,400	$0	$442,800	$885,600
Operating Costs	$1,279,200	$0	$590,400	$688,800	$0	$216,480	$472,320
Total Variable Costs	$3,460,400	$0	$1,443,200	$2,017,200	$0	$659,280	$1,357,920
Contribution Margin	$639,600	$0	$196,800	$442,800	$0	$324,720	$118,080
Traceable & Controllable Fixed Costs	$280,000	$56,000	$112,000	$112,000	$16,800	$50,400	$44,800
Traceable & Noncontrollable Fixed Costs	$250,000	$25,000	$125,000	$100,000	$50,000	$35,000	$15,000
Segmental Margin	$109,600	($81,000)	($40,200)	$230,800	($66,800)	$239,320	$58,280
Common Fixed Costs	$100,000
Net Income (Loss)	$9,600

	Combined Company	Not Allowed	London Store	New York Store	Not Allowed	Men's Wear	Women's Wear
Sales	4100000	=B2-D2-E2	=B2*40%	=B2*60%	0	=E2*40%	=E2*60%
Variable Costs:
Cost of Goods Sold	=SUM(C4:E4)	0	=D2*52%	=SUM(F4:H4)	0	=G2*45%	=H2*60%
Operating Costs	=SUM(C5:E5)	0	=D2*36%	=SUM(F5:H5)	0	=G2*22%	=H2*32%
Total Variable Costs	=SUM(B4:B5)	=SUM(C4:C5)	=SUM(D4:D5)	=SUM(E4:E5)	=SUM(F4:F5)	=SUM(G4:G5)	=SUM(H4:H5)
Contribution Margin	=B2-B6	=C2-C6	=D2-D6	=E2-E6	=F2-F6	=G2-G6	=H2-H6
Traceable & Controllable Fixed Costs	=SUM(C8:E8)	=280000*20%	=280000*40%	=280000*40%	=E8*15%	=E8*45%	=E8*40%
Traceable & Noncontrollable Fixed Costs	=SUM(C9:E9)	=250000*10%	=250000*50%	=250000*40%	=E9*50%	=E9*35%	=E9*15%
Segmental Margin	=B7-B8-B9	=C7-C8-C9	=D7-D8-D9	=E7-E8-E9	=F7-F8-F9	=G7-G8-G9	=H7-H8-H9
Common Fixed Costs	100000
Net Income (Loss)	=B10-B11