Buckeye Department Stores, Inc. operates a chain of department stores in Ohio. The company’s organization chart appears below. Operating data for 20x1 follow.
The following fixed expenses are controllable at the divisional level: depreciation—furnishings, computing and billing, warehouse, insurance, and security. In addition to these expenses, each division annually incurs $50,000 of computing costs, which are not allocated to individual stores.
The following fixed expenses are controllable only at the company level: depreciation—building, property taxes, and supervisory salaries. In addition to these expenses, each division incurs costs for supervisory salaries of $100,000, which are not allocated to individual stores.
Buckeye Department Stores incurs common fixed expenses of $120,000, which are not allocated to the two divisions. Income-tax expense for 20x1 is $1,950,000.
Required:
- 1. Prepare a segmented income statement similar to Exhibit 12–7 for Buckeye Department Stores, Inc. The statement should have the following columns:
Prepare the statement in the contribution format, and indicate the controllability of expenses. Subtract all variable expenses, including cost of merchandise sold, from sales revenue to obtain the contribution margin.
- 2. How would the segmented income statement help the president of Buckeye Department Stores manage the company?
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Managerial Accounting: Creating Value in a Dynamic Business Environment
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- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub