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Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $3,000 per month and is expected to increase the sales of whichever product is advertised by $40,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. e. Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the monthly sales in Division 2 increase to $190,000.

Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $3,000 per month and is expected to increase the sales of whichever product is advertised by $40,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. e. Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the monthly sales in Division 2 increase to $190,000.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $3,000 per month and is expected to increase the sales of whichever product is advertised by $40,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. e. Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the monthly sales in Division 2 increase to $190,000.
Transcribed Image Text:Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $3,000 per month and is expected to increase the sales of whichever product is advertised by $40,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. e. Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the monthly sales in Division 2 increase to $190,000.
Sales Variable costs Contribution margin Fixed costs traceable to divisions Division responsibility margin Common fixed costs Income from operations Sales Variable costs Contribution margin Fixed costs traceable to products Product responsibility margin Common fixed costs Responsibility margin for division Butterfield, Inc Dollars $ 480,000 237,000 $ 243,000 146,700 $ 96,300 50,000 $ 46,300 Division 1 Dollars $ 310,000 186,000 $ 124,000 43,400 $ 80,600 21,700 $ 58,900 Investment Centers Division 1 Dollars % 100.00% $ 310,000 100% 49.38 186,000 50.63% $ 124,000 30.56 65,100 20.06% $ 58,900 10.42 9.65% Dollars $ 170,000 51,000 60 40% $ 119,000 21 81,600 19% $ 37,400 Profit Centers Product A 응 Dollars 100% $ 124,000 60 55,800 40% $ 68,200 14 13,020 26% $ 55,180 7 19% Division 2 응 100% 30 70% 48 22% Product B 응 Dollars $ 186,000 100.00% 45.00 130, 200 55.00% $ 55,800 10.50 30,380 44.50% $ 25,420 응 100.00% 70.00 30.00% 16.33 13.67%
Transcribed Image Text:Sales Variable costs Contribution margin Fixed costs traceable to divisions Division responsibility margin Common fixed costs Income from operations Sales Variable costs Contribution margin Fixed costs traceable to products Product responsibility margin Common fixed costs Responsibility margin for division Butterfield, Inc Dollars $ 480,000 237,000 $ 243,000 146,700 $ 96,300 50,000 $ 46,300 Division 1 Dollars $ 310,000 186,000 $ 124,000 43,400 $ 80,600 21,700 $ 58,900 Investment Centers Division 1 Dollars % 100.00% $ 310,000 100% 49.38 186,000 50.63% $ 124,000 30.56 65,100 20.06% $ 58,900 10.42 9.65% Dollars $ 170,000 51,000 60 40% $ 119,000 21 81,600 19% $ 37,400 Profit Centers Product A 응 Dollars 100% $ 124,000 60 55,800 40% $ 68,200 14 13,020 26% $ 55,180 7 19% Division 2 응 100% 30 70% 48 22% Product B 응 Dollars $ 186,000 100.00% 45.00 130, 200 55.00% $ 55,800 10.50 30,380 44.50% $ 25,420 응 100.00% 70.00 30.00% 16.33 13.67%
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