Shown as follows are responsibility income statements for Butterfield, Inc., for the month of March. Investment Centers Butterfield, Inc Division 1 Division 2 Dollars % Dollars % Dollars % Sales $ 460,000 100.00 % $ 290,000 100 % $ 170,000 100 % Variable costs 225,000 48.91 174,000 60 51,000 30 Contribution margin $ 235,000 51.09 % $ 116,000 40 % $ 119,000 70 % Fixed costs traceable to divisions 142,500 30.98 60,900 21 81,600 48 Division responsibility margin $ 92,500 20.11 % $ 55,100 19 % $ 37,400 22 % Common fixed costs 40,000 8.70 Income from operations $ 52,500 11.41 % Profit Centers Division 1 Product A Product B Dollars % Dollars % Dollars % Sales $ 290,000 100 % $ 116,000 100.00 % $ 174,000 100.00 % Variable costs 174,000 60 52,200 45.00 121,800 70.00 Contribution margin $ 116,000 40 % $ 63,800 55.00 % $ 52,200 30.00 % Fixed costs traceable to products 40,600 14 12,180 10.50 28,420 16.33 Product responsibility margin $ 75,400 26 % $ 51,620 44.50 % $ 23,780 13.67 % Common fixed costs 20,300 7 Responsibility margin for division $ 55,100 19 % Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $4,000 per month and is expected to increase the sales of whichever product is advertised by $30,000 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.
Shown as follows are responsibility income statements for Butterfield, Inc., for the month of March. Investment Centers Butterfield, Inc Division 1 Division 2 Dollars % Dollars % Dollars % Sales $ 460,000 100.00 % $ 290,000 100 % $ 170,000 100 % Variable costs 225,000 48.91 174,000 60 51,000 30 Contribution margin $ 235,000 51.09 % $ 116,000 40 % $ 119,000 70 % Fixed costs traceable to divisions 142,500 30.98 60,900 21 81,600 48 Division responsibility margin $ 92,500 20.11 % $ 55,100 19 % $ 37,400 22 % Common fixed costs 40,000 8.70 Income from operations $ 52,500 11.41 % Profit Centers Division 1 Product A Product B Dollars % Dollars % Dollars % Sales $ 290,000 100 % $ 116,000 100.00 % $ 174,000 100.00 % Variable costs 174,000 60 52,200 45.00 121,800 70.00 Contribution margin $ 116,000 40 % $ 63,800 55.00 % $ 52,200 30.00 % Fixed costs traceable to products 40,600 14 12,180 10.50 28,420 16.33 Product responsibility margin $ 75,400 26 % $ 51,620 44.50 % $ 23,780 13.67 % Common fixed costs 20,300 7 Responsibility margin for division $ 55,100 19 % Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $4,000 per month and is expected to increase the sales of whichever product is advertised by $30,000 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Shown as follows are responsibility income statements for Butterfield, Inc., for the month of March.
Investment Centers | ||||||||||||||||||
Butterfield, Inc | Division 1 | Division 2 | ||||||||||||||||
Dollars | % | Dollars | % | Dollars | % | |||||||||||||
Sales | $ | 460,000 | 100.00 | % | $ | 290,000 | 100 | % | $ | 170,000 | 100 | % | ||||||
Variable costs | 225,000 | 48.91 | 174,000 | 60 | 51,000 | 30 | ||||||||||||
Contribution margin | $ | 235,000 | 51.09 | % | $ | 116,000 | 40 | % | $ | 119,000 | 70 | % | ||||||
Fixed costs traceable to divisions | 142,500 | 30.98 | 60,900 | 21 | 81,600 | 48 | ||||||||||||
Division responsibility margin | $ | 92,500 | 20.11 | % | $ | 55,100 | 19 | % | $ | 37,400 | 22 | % | ||||||
Common fixed costs | 40,000 | 8.70 | ||||||||||||||||
Income from operations | $ | 52,500 | 11.41 | % | ||||||||||||||
Profit Centers | ||||||||||||||||||
Division 1 | Product A | Product B | ||||||||||||||||
Dollars | % | Dollars | % | Dollars | % | |||||||||||||
Sales | $ | 290,000 | 100 | % | $ | 116,000 | 100.00 | % | $ | 174,000 | 100.00 | % | ||||||
Variable costs | 174,000 | 60 | 52,200 | 45.00 | 121,800 | 70.00 | ||||||||||||
Contribution margin | $ | 116,000 | 40 | % | $ | 63,800 | 55.00 | % | $ | 52,200 | 30.00 | % | ||||||
Fixed costs traceable to products | 40,600 | 14 | 12,180 | 10.50 | 28,420 | 16.33 | ||||||||||||
Product responsibility margin | $ | 75,400 | 26 | % | $ | 51,620 | 44.50 | % | $ | 23,780 | 13.67 | % | ||||||
Common fixed costs | 20,300 | 7 | ||||||||||||||||
Responsibility margin for division | $ | 55,100 | 19 | % | ||||||||||||||
Required:
a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $4,000 per month and is expected to increase the sales of whichever product is advertised by $30,000 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.
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