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Problem 22.5A (Algo) Analysis of Responsibility Income Statements (LO22-3, LO22-4, LO22-5) Shown as follows are responsibility income statements for Butterfield, Incorporated, for the month of March: Sales Variable costs Contribution margin Fixed costs traceable to divisions Division responsibility margin Common fixed costs Income from operations Sales Variable costs Contribution margin Fixed costs traceable to products Product responsibility margin Common fixed costs Responsibility margin for division Butterfield, Incorporated Dollars % $ 470,000 100.00% 231,000 49.15 50.85% 30.77 20.09% 10.64 9.45% $ 239,000 144,600 $ 94,400 50,000 $ 44,400 Division 1 Dollars $ 300,000 180,000 $ 120,000 42,000 $ 78,000 21,000 $ 57,000 % 100% 60 40% 14 26% 7 19% Investment Centers Division 1 Dollars % 60 $ 300,000 100% 180,000 $ 120,000 63,000 $ 57,000 40% 21 19% Profit Centers Product A Dollars % $ 120,000 100.00% 54,000 45.00 55.00% 10.50 44.50% $ 66,000 12,600 $ 53,400 Division 2 Dollars $ 170,000 51,000 $ 119,000 81,600 $ 37,400 Product B Dollars $ 180,000 126,000 $ 54,000 29,400 $ 24,600 % 100% 30 70% 48 22% % 100.00% 70.00 30.00% 16.33 13.67% Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $5,000 per month and is expected to increase the sales of whichever product is advertised by $30,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. e. Prepare an income statement for Butterfield, Incorporated, by division, under the assumption that in April the monthly sales in Division 2 increase to $190,000.

Problem 22.5A (Algo) Analysis of Responsibility Income Statements (LO22-3, LO22-4, LO22-5) Shown as follows are responsibility income statements for Butterfield, Incorporated, for the month of March: Sales Variable costs Contribution margin Fixed costs traceable to divisions Division responsibility margin Common fixed costs Income from operations Sales Variable costs Contribution margin Fixed costs traceable to products Product responsibility margin Common fixed costs Responsibility margin for division Butterfield, Incorporated Dollars % $ 470,000 100.00% 231,000 49.15 50.85% 30.77 20.09% 10.64 9.45% $ 239,000 144,600 $ 94,400 50,000 $ 44,400 Division 1 Dollars $ 300,000 180,000 $ 120,000 42,000 $ 78,000 21,000 $ 57,000 % 100% 60 40% 14 26% 7 19% Investment Centers Division 1 Dollars % 60 $ 300,000 100% 180,000 $ 120,000 63,000 $ 57,000 40% 21 19% Profit Centers Product A Dollars % $ 120,000 100.00% 54,000 45.00 55.00% 10.50 44.50% $ 66,000 12,600 $ 53,400 Division 2 Dollars $ 170,000 51,000 $ 119,000 81,600 $ 37,400 Product B Dollars $ 180,000 126,000 $ 54,000 29,400 $ 24,600 % 100% 30 70% 48 22% % 100.00% 70.00 30.00% 16.33 13.67% Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $5,000 per month and is expected to increase the sales of whichever product is advertised by $30,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. e. Prepare an income statement for Butterfield, Incorporated, by division, under the assumption that in April the monthly sales in Division 2 increase to $190,000.

Accounting (Text Only)
Accounting (Text Only)
26th Edition
ISBN:9781285743615
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter21: Cost Behavior And Cost-volume-profit Analysis
Section: Chapter Questions
Problem 21.26EX: Items on variable costing income statement In the following equations, based on the variable costing...
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Problem 22.5A (Algo) Analysis of Responsibility Income Statements (LO22-3, LO22-4, LO22-5) Shown as follows are responsibility income statements for Butterfield, Incorporated, for the month of March: Sales Variable costs Contribution margin Fixed costs traceable to divisions Division responsibility margin Common fixed costs Income from operations. Sales Variable costs Contribution margin Fixed costs traceable to products Product responsibility margin Common fixed costs Responsibility margin for division Butterfield, Incorporated Dollars % $ 470,000 100.00% 231,000 49.15 50.85% 30.77 20.09% 10.64 9.45% $ 239,000 144,600 $ 94,400 50,000 $ 44,400 Division 1 Dollars $ 300,000 180,000 $ 120,000 42,000 $ 78,000 21,000 $ 57,000 % 100% 60 40% 14 26% 7 19% Investment Centers Division 1 Dollars $ 300,000 180,000 $ 120,000 63,000 $ 57,000 Profit Centers Product A % 100% 60 40% 21 19% Dollars % $ 120,000 100.00% 54,000 45.00 $ 66,000 55.00% 12,600 10.50 44.50% $ 53,400 Division 2 Dollars $ 170,000 51,000 $ 119,000 81,600 $ 37,400 Product B Dollars $ 180,000 126,000 $ 54,000 29,400 $ 24,600 % 100% 30 70% 48 22% % 100.00% 70.00 30.00% 16.33 13.67% Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $5,000 per month and is expected to increase the sales of whichever product is advertised by $30,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. e. Prepare an income statement for Butterfield, Incorporated, by division, under the assumption that in April the monthly sales in Division 2 increase to $190,000.
Transcribed Image Text:Problem 22.5A (Algo) Analysis of Responsibility Income Statements (LO22-3, LO22-4, LO22-5) Shown as follows are responsibility income statements for Butterfield, Incorporated, for the month of March: Sales Variable costs Contribution margin Fixed costs traceable to divisions Division responsibility margin Common fixed costs Income from operations. Sales Variable costs Contribution margin Fixed costs traceable to products Product responsibility margin Common fixed costs Responsibility margin for division Butterfield, Incorporated Dollars % $ 470,000 100.00% 231,000 49.15 50.85% 30.77 20.09% 10.64 9.45% $ 239,000 144,600 $ 94,400 50,000 $ 44,400 Division 1 Dollars $ 300,000 180,000 $ 120,000 42,000 $ 78,000 21,000 $ 57,000 % 100% 60 40% 14 26% 7 19% Investment Centers Division 1 Dollars $ 300,000 180,000 $ 120,000 63,000 $ 57,000 Profit Centers Product A % 100% 60 40% 21 19% Dollars % $ 120,000 100.00% 54,000 45.00 $ 66,000 55.00% 12,600 10.50 44.50% $ 53,400 Division 2 Dollars $ 170,000 51,000 $ 119,000 81,600 $ 37,400 Product B Dollars $ 180,000 126,000 $ 54,000 29,400 $ 24,600 % 100% 30 70% 48 22% % 100.00% 70.00 30.00% 16.33 13.67% Required: a. The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $5,000 per month and is expected to increase the sales of whichever product is advertised by $30,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. e. Prepare an income statement for Butterfield, Incorporated, by division, under the assumption that in April the monthly sales in Division 2 increase to $190,000.
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