Fog City Retail operates a retail store in Phoenix, Las Vegas, and Portland. The following information relates to the Phoenix facility:
· The store sold 65,000 units at $18.00 each, after having purchased the units from various suppliers for $12.50. Phoenix salespeople are paid a 5% commission based on gross sales dollars.
· Phoenix’s sales manager oversees the placement of local advertising contracts, which totaled $54,000 for the year. Local property taxes amounted to $14,500.
· The sales manager’s $65,000 salary is set by Phoenix’s store manager. In contrast, the store manager’s $134,000 salary is determined by Fog City’s vice president.
· Phoenix incurred $6,800 of other noncontrollable costs along with $10,000 of income tax expense.
· Nontraceable (common) corporate overhead totaled $68,000.
Fog City’s corporate headquarters is located in Portland, and the company uses responsibility accounting to evaluate performance.
Required:
Prepare a segmented income statement for the Phoenix store, being sure to disclose the segment contribution margin, the segment profit margin, and net income
| Particular | Amount in $ | Amount in $ |
| Sales revenue (65,000 units x $18.00) | 1170000 | |
| Less variable costs: | ||
| Cost of goods sold (65,000 units x $12.50) | 812500 | |
| Sales commissions ($1,170,000 x 5%) | 58500 | 871000 |
| Segment contribution margin $ 299,000 | 299000 | |
| Less traceable, controllable fixed costs: | ||
| Local Adverstsing | 54000 | |
| Sales Manager’s salary | 65000 | 119000 |
| Segment profit margin | 180000 | |
| Less traceable, uncontrollable fixed costs: | ||
| Local property taxes | 14500 | |
| Store manager’s salary | 134000 | |
| Other | 6800 | 155300 |
| Income before taxes | 24700 | |
| Less: Income tax expense | 10,000 | |
| Net income | 14,700 |
Note:
The no traceable costs are ignored.
