
Draft a contribution income statement for CWI.

Explanation of Solution
Prepare a contribution income statement for CWI.
Particulars | Total ($) | Not allocated ($) | Boston ($) | Hartford ($) |
Net sales | 12,900,000 | $5,875,000 | 7,025,000 | |
Variable cost | ||||
COGS | 7,880,500 | 3,525,000 (1) | 4,355,500 | |
Operating cost | 3,799,750 | 1,762,500 (4) | 2,037,250 | |
Total variable cost | 11,680,250 | 5,287,500 | 6,392,750 | |
Contribution margin | 1,219,750 | 587,500 | 632,250 | |
Less: Controllable fixed cost (6) | 475,000 | 47,500 | 213,750 | 213,750 |
Controllable margin | 744,750 | 373,750 | 418,500 | |
Less: Non controllable fixed cost (8) | 375,000 | 37,500 | 150,000 | 187,500 |
Contribution by profit center | 369,750 | 85,000 | 223,750 | 231,000 |
Less: Non traceable costs | 325,000 | |||
Operating income | 44,750 |
Table (1)
Breakdown of Hartford’s contribution:
Particulars | Hartford ($) | Not allocated ($) | Clothing ($) | Cycle & Run ($) |
Net sales (2) | 7,025,000 | 4,215,000 | 2,810,000 | |
Variable cost | ||||
COGS (3) | 4,355,500 | 2,950,500 | 1,405,000 | |
Variable operating cost (5) | 2,037,250 | 1,053,750 | 983,500 | |
Contribution margin | 632,250 | 210,750 | 421,500 | |
Controllable fixed cost (7) | 213,750 | 42,750 | 106,875 | 64,125 |
Controllable margin | 418,500 | 103,875 | 357,375 | |
Non controllable fixed costs (9) | 187,500 | 18,750 | 103,125 | 65,625 |
Contribution by profit center | 231,000 | 61,500 | 750 | 291,750 |
Table (2)
Working notes:
1) Calculate the cost of goods sold (Boston):
2) Calculate the sales of Hartford clothing and cycle:
For Hartford clothing’s sale:
For Hartford cycle’s sale:
3) Calculate the cost of goods sold (Hartford):
For cost of goods sold of Hartford clothing:
For cost of goods sold of Hartford cycle:
4) Calculate the variable operating cost of Boston:
5) Calculate the operating cost of Hartford:
For Hartford clothing:
For Hartford cycle:
6) Calculate the fixed controllable cost:
For Boston:
For Hartford:
Not allocated:
7) Calculate the fixed controllable cost of Hartford clothing and cycle:
For Hartford clothing:
For Hartford cycles:
Not allocated:
8) Calculate the non-controllable fixed cost:
For Boston:
For Hartford:
Not allocated:
9) Calculate the fixed non-controllable cost of Hartford clothing and cycle:
For Hartford clothing:
For Hartford cycle:
Not allocated:
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Chapter 18 Solutions
Cost Management
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