Show-Off, Inc., sells merchandise through three retail outlets-in Las Vegas, Reno, and Sacramento-and operates a general corporate headquarters in Reno. A review of the company's income statement indicates a record year in terms of sales and profits. Management, though, desires additional insights about the individual stores and has asked that Judson Wyatt, a newly hired intern, prepare a segmented income statement. The following information has been extracted from Show-Off's accounting records: • The sales volume, sales price, and purchase price data follow: Las Vegas Reno Sacramento 37,000 units 41,000 units 46,000 units Sales volume Unit selling $12.00 price Unit purchase. 5.50 price Sales manager salary Store manager salaries Other $ 11.00 noncontrollable 5.50 • The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other noncontrollable (but traceable) costs: costs Las Vegas Sales commissions Local advertising $11,000 $22,000 Local property 4,500 2,000 taxes 6% Reno $ 9.50 6% 31,000 39,000 5,800 4,600 6.00 Sacramento 6% $48,000 6,000 32,000 38,000 17,800 Local advertising decisions are made at the store manager level. The sales manager's salary in Sacramento is determined by the Sacramento store manager; in contrast, store manager salaries are set by Show-Off's vice president. • Nontraceable fixed corporate expenses total $192,300. • The company uses a responsibility accounting system. Required: 1. Assume the role of Judson Wyatt and prepare a segmented income statement for Show-Off. 2. Identify the probable causes for the poor performance of the weakest store. 3. Which of the following should be reviewed in evaluating the performance of the store manager?
Show-Off, Inc., sells merchandise through three retail outlets-in Las Vegas, Reno, and Sacramento-and operates a general corporate headquarters in Reno. A review of the company's income statement indicates a record year in terms of sales and profits. Management, though, desires additional insights about the individual stores and has asked that Judson Wyatt, a newly hired intern, prepare a segmented income statement. The following information has been extracted from Show-Off's accounting records: • The sales volume, sales price, and purchase price data follow: Las Vegas Reno Sacramento 37,000 units 41,000 units 46,000 units Sales volume Unit selling $12.00 price Unit purchase. 5.50 price Sales manager salary Store manager salaries Other $ 11.00 noncontrollable 5.50 • The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries, and other noncontrollable (but traceable) costs: costs Las Vegas Sales commissions Local advertising $11,000 $22,000 Local property 4,500 2,000 taxes 6% Reno $ 9.50 6% 31,000 39,000 5,800 4,600 6.00 Sacramento 6% $48,000 6,000 32,000 38,000 17,800 Local advertising decisions are made at the store manager level. The sales manager's salary in Sacramento is determined by the Sacramento store manager; in contrast, store manager salaries are set by Show-Off's vice president. • Nontraceable fixed corporate expenses total $192,300. • The company uses a responsibility accounting system. Required: 1. Assume the role of Judson Wyatt and prepare a segmented income statement for Show-Off. 2. Identify the probable causes for the poor performance of the weakest store. 3. Which of the following should be reviewed in evaluating the performance of the store manager?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Show-Off, Inc., sells merchandise through three retail outlets-in Las Vegas, Reno, and Sacramento-and operates a
general corporate headquarters in Reno. A review of the company's income statement indicates a record year in terms
of sales and profits. Management, though, desires additional insights about the individual stores and has asked that
Judson Wyatt, a newly hired intern, prepare a segmented income statement. The following information has been
extracted from Show-Off's accounting records:
The sales volume, sales price, and purchase price data follow:
Las Vegas
Reno
Sacramento
37,000 units 41,000 units
46,000 units
Sales
volume
Unit
selling $ 12.00
price
Unit
purchase 5.50
price
salary
Store manager
salaries
Other
noncontrollable
The following expenses were incurred for sales commissions, local advertising, property taxes, management salaries,
and other noncontrollable (but traceable) costs:
costs
$11.00
Sales commissions
Local advertising $11,000 $22,000
Local property
4,500
2,000
taxes
Sales manager
5.50
Las
Vegas
31,000
6%
Variable operating expenses:
Reno
Required Required Required
1
2
3
Total
Segment profit margin
5,800 4,600
39,000
$ 9.50
6%
Total
Segment contribution margin
Fixed expenses controllable by segment
manager:
6.00
Local advertising decisions are made at the store manager level. The sales manager's salary in Sacramento is
determined by the Sacramento store manager; in contrast, store manager salaries are set by Show-Off's vice president.
• Nontraceable fixed corporate expenses total $192,300.
The company uses a responsibility accounting system.
Sacramento
Total
Profit margin controllable by segment manager
Fixed expenses traceable to segment, but
controllable by others:
Required:
1. Assume the role of Judson Wyatt and prepare a segmented income statement for Show-Off.
2. Identify the probable causes for the poor performance of the weakest store.
3. Which of the following should be reviewed in evaluating the performance of the store manager?
$48,000
6,000
32,000
38,000
Answer is not complete.
Complete this question by entering your answers in the tabs below.
17,800
Assume the role of Judson Wyatt and prepare segmented income statement for Show-Off. (Round
your answers to the nearest whole dollar.)
6%
Show-
Off, Inc.
$
$
$
$
$
$
Las
Vegas
0 $
0 $
0 $
0
$
0
$
0 $
0 $
0
$
0
$
0 $
0
0
$
$
Reno
Sacramento
0 $
0
$
0 $
0 $
0
$
0 $
0
0
0
0
0
0
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Step 1: Introduction of segmented income statement
VIEWStep 2: Requirement 1 - Prepare a segmented income statement
VIEWStep 3: Requirement 2 - Identify the probable causes for the poor performance of the weakest store
VIEWStep 4: Requirement 3 - Determine what should be reviewed in evaluating the performance of the store
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