Improvement Station is a national home improvement chain with more than 100 stores throughout the country. The manager of each store receives a salary plus a bonus equal to a percent of the store’s net income for the reporting period. The following net income calculation is on the Denver store manager’s performance report for the recent monthly period. Sales . $2,500,000 Cost of goods sold . 800,000 Wages expense 500,000 Utilities expense 200,000 Home office expense . . . . . . . . . . . . . . 75,000 Net income . $ 925,000 Manager’s bonus (0.5%) $ 4,625 In previous periods, the bonus had also been 0.5%, but the performance report had not included any charges for the home office expense, which is now assigned to each store as a percent of its sales. Required Assume that you are the national office manager. Write a half-page memorandum to your store managers explaining why home office expense is in the new performance report.
Improvement Station is a national home improvement chain with more than 100 stores
throughout the country. The manager of each store receives a salary plus a bonus equal to a percent of the
store’s net income for the reporting period. The following net income calculation is on the Denver store
manager’s performance report for the recent monthly period. Sales . $2,500,000
Cost of goods sold . 800,000
Wages expense 500,000
Utilities expense 200,000
Home office expense . . . . . . . . . . . . . . 75,000
Net income . $ 925,000
Manager’s bonus (0.5%) $ 4,625
In previous periods, the bonus had also been 0.5%, but the performance report had not included any
charges for the home office expense, which is now assigned to each store as a percent of its sales.
Required
Assume that you are the national office manager. Write a half-page memorandum to your store managers
explaining why home office expense is in the new performance report.
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