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Shown below are responsibility income statements for Butterfield, Inc., for the month of March. |
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Investment Centers |
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Butterfield, Inc |
Division 1 |
Division 2 |
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Dollars |
% |
Dollars |
% |
Dollars |
% |
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Sales |
$ |
460,000 |
100.00 |
% |
$ |
290,000 |
100 |
% |
$ |
170,000 |
100 |
% |
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Variable costs |
225,000 |
48.91 |
174,000 |
60 |
51,000 |
30 |
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Contribution margin |
$ |
235,000 |
51.09 |
% |
$ |
116,000 |
40 |
% |
$ |
119,000 |
70 |
% |
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Fixed costs traceable to divisions |
142,500 |
30.98 |
60,900 |
21 |
81,600 |
48 |
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Division responsibility margin |
$ |
92,500 |
20.11 |
% |
$ |
55,100 |
19 |
% |
$ |
37,400 |
22 |
% |
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Common fixed costs |
50,000 |
10.87 |
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Income from operations |
$ |
42,500 |
9.24 |
% |
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Profit Centers |
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Division 1 |
Product A |
Product B |
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Dollars |
% |
Dollars |
% |
Dollars |
% |
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Sales |
$ |
290,000 |
100 |
% |
$ |
116,000 |
100.00 |
% |
$ |
174,000 |
100.00 |
% |
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Variable costs |
174,000 |
60 |
52,200 |
45.00 |
121,800 |
70.00 |
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Contribution margin |
$ |
116,000 |
40 |
% |
$ |
63,800 |
55.00 |
% |
$ |
52,200 |
30.00 |
% |
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Fixed costs traceable to products |
40,600 |
14 |
12,180 |
10.50 |
28,420 |
16.33 |
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Product responsibility margin |
$ |
75,400 |
26 |
% |
$ |
51,620 |
44.50 |
% |
$ |
23,780 |
13.67 |
% |
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Common fixed costs |
20,300 |
7 |
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Responsibility margin for division |
$ |
55,100 |
19 |
% |
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Instructions |
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a. |
The company plans to initiate an advertising campaign for one of the two products in Division 1. The campaign would cost $3,000 per month and is expected to increase the sales of whichever product is advertised by $40,000 per month. Compute the expected increase in the responsibility margin of Division 1 assuming that (1) product A is advertised and (2) product B is advertised. (Omit the “$” sign in your response.) |
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Expected change in responsibility margin |
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Product A |
$ 19000 |
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Product B |
$ 9000 |
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e. |
Prepare an income statement for Butterfield, Inc., by division, under the assumption that in April the monthly sales in Division 2 increase to $190,000 Organize this income statement in the format illustrated above, including columns for percentages. (Round your answers to 2 decimal places. Omit the “$” sign in your response.) |
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BUTTERFIELD, INC. Income Statement by Divisions For the Month Ended March 31 |
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Divisions |
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Butterfield, Inc. |
Division 1 |
Division 2 |
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Dollars |
Percent |
Dollars |
Percent |
Dollars |
Percent |
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(Click to select)Fixed costs traceable to divisionsContribution marginSalesVariable costsCommon costs |
$ |
$ |
$ |
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(Click to select)Variable costsCommon costsFixed costs traceable to divisionsSalesContribution margin |
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(Click to select)Variable costsContribution marginCommon costsFixed costs traceable to divisionsSales |
$ |
$ |
$ |
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(Click to select)Variable costsFixed costs traceable to divisionsSalesContribution marginCommon costs |
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Division responsibility margin |
$ |
$ |
$ |
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(Click to select)Common costsVariable costsFixed costs traceable to divisionsContribution marginSales |
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Income from operations |
$ |
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