Buckeye Department Stores, Inc., operates a chain of department stores in Ohio.

Question

Buckeye Department Stores, Inc., operates a chain of department stores in Ohio. The company’s organization chart appears below. Operating data for 20x5 follow. Picture BUCKEYE DEPARTMENT STORES, INC. Operating Data for 20x5 (in thousands) Columbus Division Olentangy Store Scioto Store Downtown Store Cleveland Division (total for all stores) Sales revenue $ 6,000 $ 2,500 $ 15,000 $ 26,000 Variable expenses: Cost of merchandise sold 4,000 2,100 5,000 13,000 Sales personnel—salaries 600 320 710 1,300 Sales commissions 70 30 80 210 Utilities 90 50 140 300 Other 80 35 110 260 Fixed expenses: Depreciation—buildings 100 80 250 480 Depreciation—furnishings 90 60 130 300 Computing and billing 40 30 75 170 Warehouse 80 50 220 460 Insurance 40 25 80 210 Property taxes 35 20 70 180 Supervisory salaries 160 120 410 920 Security 30 30 70 220 The following fixed expenses are controllable at the divisional level: depreciation—furnishings, computing and billing, warehouse, insurance, and security. In addition to these expenses, each division annually incurs $50,000 of computing costs, which are not allocated to individual stores. The following fixed expenses are controllable only at the company level: depreciation—building, property taxes, and supervisory salaries. In addition to these expenses, each division incurs costs for supervisory salaries of $140,000, which are not allocated to individual stores. Buckeye Department Stores incurs common fixed expenses of $150,000, which are not allocated to the two divisions. Income-tax expense for 20x5 is $1,930,000. Required: 1. Prepare a segmented income statement for Buckeye Department Stores, Inc. (Enter your answers in thousands.) 2. How would the segmented income statement help the president of Buckeye Department Stores manage the company? It helps to reallocate fixed expenses based on contribution margins of each segment. It helps to ascertain the profitability of each division, which is more important than the rate of return on investment of the various segments. It would help to gain insight into the performance of the individual stores and their divisions. 1. Prepare a segmented income statement for Buckeye Department Stores, Inc. (Enter your answers in thousands.)

Explanation / Answer

Buckeye Department Stores, Inc Cleveland Division Columbus Division Olentangy Store Scioto Store Downtown Store Not Allocated Sales revenue 49500 26000 23500 6000 2500 15000 Variable operating expenses: Cost of merchandise sold 24100 13000 11100 4000 2100 5000 Sales personnel—salaries 2930 1300 1630 600 320 710 Sales commissions 390 210 180 70 30 80 Utilities 580 300 280 90 50 140 Other 485 260 225 80 35 110      Total variable expenses 28485 15070 13415 4840 2535 6040 Segment contribution margin 21015 10930 10085 1160 -35 8960 Less: Fixed expenses controllable by segment manager:            0 Depreciation—furnishings 580 300 280 90 60 130 Computing and billing 415 220 195 40 30 75 50 Warehouse 810 460 350 80 50 220 Insurance 360 210 150 45 25 80 Security 350 220 130 30 30 70 Total 2515 1410 1105 285 195 575 50 Profit margin controllable by segment manager 18500 9520 8980 875 -230 8385 -50 Less: Fixed expenses, traceable to segment, but controllableby others:      Depreciation—buildings 910 480 430 100 80 250      Property taxes 305 180 125 35 20 70      Supervisory salaries 1890 1060 830 160 120 410 140 Total 3105 1720 1385 295 220 730 140 Profit margin traceable to segment 15395 7800 7595 580 -450 7655 -190 Less: Common fixed expenses 150 Income before taxes 15245 Less: Income tax expense 1930 Net income 13315

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.