Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 46

Contribution Income Statement for Profit Centers Glamour, Inc., is an upscale clothing store in New York City and London. Each store has two main departments, Men’s Apparel and Women’s Apparel. Marie Phelps, Glamour’s CFO, wants to use strategic performance measurement to better understand the company’s financial results. She has decided to use the profit centers method to measure performance and has gathered the following information about the two stores and the two departments of the New York City store:

Total net sales $2,250,000
Fixed costs
Partly traceable and controllable	200,000
Partly traceable but noncontrollable	160,000
Nontraceable costs	55,000
Total net sales (percent)
London Store	40%
New York—Men’s Apparel	30
New York—Women’s Apparel	70
Cost of goods sold—variable (percent of sales)
London	55%
New York—Men’s Apparel	60
New York—Women’s Apparel	40
Variable operating costs (percent of sales)
London	34%
New York—Men’s Apparel	24
New York—Women’s Apparel	30
Fixed controllable costs—partly traceable (percent of total)
London	40%
New York total	40
Men’s Apparel	45
Women’s Apparel	40
Could not be traced to Men’s or Women’s apparel	15
Could not be traced to New York or London	20
Fixed noncontrollable costs—partly traceable (percent of total)
London	50%
New York total	40
Men’s Apparel	30
Women’s Apparel	10
Could not be traced to Men’s or Women’s apparel	60
Could not be traced to London or New York	10

Required

1. Using this information and a spreadsheet system, prepare a contribution income statement for Glamour, showing contribution margin, controllable margin, and contribution by profit center (CPC) for both the London and New York stores and for both departments of the New York store.

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2. What are the global issues that are an important part of the profit center evaluation for Glamour Inc.?

Step 1 of 2

Contribution Income Statement for Profit Centers(25 min)