George McBee owns a small chain of specialty toy stores in Edmonton and Calgary. The company’s organization chart follows: The following data about 2010 operations were also available. 1. All five stores used the same pricing formula; therefore, all had the same gross margin percentage. 2. Sales were largest in the two Downtown stores, with 30 percent of the total sales volume in each. The Plaza and Airport stores each provided 15 percent of total sales volume, and the Littleton store provided 10 percent. 3. Variable operating costs at the stores were 10 percent of revenue for the Downtown stores. The other stores had lower variable and higher fixed costs. Their variable operating costs were only 5 percent of sales revenue. 4. The fixed costs over which the store managers had control were $125,000 in each of the Downtown stores, $160,000 at the Plaza and Airport stores, and $80,000 at Littleton. 5. The remaining $910,000 of operating costs consisted of 1. $180,000 controllable by the Calgary division manager, but not by individual stores 2. $130,000 controllable by the Edmonton division manager, but not by individual stores 3. $600,000 controllable by the administrative staff 6. Of the $600,000 spent by the administrative staff, $350,000 directly supported the Calgary division, with 20 percent for the Downtown store, 30 percent for each of the Plaza and Airport stores, and 20 percent for Calgary operations in general. Another $150,000 supported the Edmonton division, 50 percent for the Downtown store, 25 percent for the Littleton store, and 25 percent supporting Edmonton operations in general. The other $100,000 was for general corporate expenses. Prepare an income statement by segments using the contribution approach to responsibility accounting. Use the format of Exhibit 13-5. Column headings should be:
George McBee owns a small chain of specialty toy stores in E…
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