various stores throughout Florida. The company, which has three
divisions (Miami, Naples, and Tampa), reported the following
information for the year just ended (in thousands):
- 1 8 Points Pretty Lady Is An Upscale Boutique That Operates Various Stores Throughout Florida The Company Which Has 1 (10.02 KiB) Viewed 50 times
management wants to allocate to the divisions on the basis of sales
revenue. As the company's chief executive officer notes, "Each
division helped to incur a portion of these costs and, as a result,
each should absorb its fair share." The firm has adopted various
responsibility accounting procedures to evaluate division
personnel.
Required: A. Compute the company's total sales revenue.
B. Calculate the amount of variable operating expense incurred
by the Naples Division.
C. Calculate the fixed costs controllable by Miami's
management.
D. Calculate the fixed costs traceable to the Tampa Division but
controllable by others.
E. Pretty Lady desires to promote a division manager to the
corporate office to oversee selected operations. In determining
which individual to promote, should Pretty Lady's top management
focus on the profit margin controllable by the division manager or
the overall divisional profit margin? Briefly explain.
F. If the company follows the desires of top management, how
much of the common fixed expenses would be allocated to the Tampa
Division?
G. Do cost allocations such as those in part "F" typically
appear on a segmented income statement?
Sales revenue Divisional contribution margin Profit margin controllable by division manager Divisional profit margin Miami Naples $9,000 $6,000 6,400 4,400 1,500 1,900 1,000 700 Tampa $5,000 3,500 1,000 200