PERFORMANCE REPORT FOR PROFIT CENTERS Watson Clothiers, a retailer specializing in men's and ladies' career clothing, has stores in two Ohio cities: Cincinnati and Columbus. These stores are evaluated as profit centers. Sales and direct costs for the stores in 20x7were as follows: Cincinnati $220,000 80,000 32,000 16,000 1,000 Net sales Cost of goods sold Sales salaries Property taxes, utilities, and depreciation Miscellaneous operating expense General Administration Personnel and Payroll Advertising The following indirect costs were incurred by service departments at Watson Clothiers during 20x9 Personnel and Payroll Advertising Columbus $380,000 152,000 $83,000 49,000 67,000 % used by Cincinnati 40% 25% 45,000 19,000 2,000 Store managers can control the services used from the Personnel and Payroll and the Advertising departments, based on hiring and marketing decisions. They cannot control services provided by General Administration. Use of service department resources in 20x9 was as follows: % used by Columbus 60% 75% Required: Prepare divisional income statements for Watson Clothiers, showing each store's income from operations. In accordance with responsibility accounting, include only controllable revenues and controllable expenses.
PERFORMANCE REPORT FOR PROFIT CENTERS Watson Clothiers, a retailer specializing in men's and ladies' career clothing, has stores in two Ohio cities: Cincinnati and Columbus. These stores are evaluated as profit centers. Sales and direct costs for the stores in 20x7were as follows: Cincinnati $220,000 80,000 32,000 16,000 1,000 Net sales Cost of goods sold Sales salaries Property taxes, utilities, and depreciation Miscellaneous operating expense General Administration Personnel and Payroll Advertising The following indirect costs were incurred by service departments at Watson Clothiers during 20x9 Personnel and Payroll Advertising Columbus $380,000 152,000 $83,000 49,000 67,000 % used by Cincinnati 40% 25% 45,000 19,000 2,000 Store managers can control the services used from the Personnel and Payroll and the Advertising departments, based on hiring and marketing decisions. They cannot control services provided by General Administration. Use of service department resources in 20x9 was as follows: % used by Columbus 60% 75% Required: Prepare divisional income statements for Watson Clothiers, showing each store's income from operations. In accordance with responsibility accounting, include only controllable revenues and controllable expenses.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:PERFORMANCE REPORT FOR PROFIT CENTERS
Watson Clothiers, a retailer specializing in men's and ladies' career clothing, has stores in two
Ohio cities: Cincinnati and Columbus. These stores are evaluated as profit centers.
Sales and direct costs for the stores in 20xwere as follows:
Net sales
Cost of goods sold
Sales salaries
Property taxes, utilities, and depreciation
Miscellaneous operating expense
General Administration
Personnel and Payroll
Advertising
Cincinnati
$220,000
80,000
32,000
16,000
1,000
The following indirect costs were incurred by service departments at Watson Clothiers during
20x9
Personnel and Payroll
Advertising
Columbus
$380,000
152,000
45,000
19,000
2,000
$83,000
49,000
67,000
Store managers can control the services used from the Personnel and Payroll and the Advertising
departments, based on hiring and marketing decisions. They cannot control services provided by
General Administration. Use of service department resources in 2009 was as follows:
% used by Cincinnati % used by Columbus
40%
60%
25%
75%
Required: Prepare divisional income statements for Watson Clothiers, showing each store's
income from operations. In accordance with responsibility accounting, include only controllable
revenues and controllable expenses.
Only Controballe Revenues -
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