Investment Centers

Butterfield, Inc

Division 1

Division 2

Dollars

%

Dollars

%

Dollars

%

Sales

$

460,000

100.00

%

$

290,000

100

%

$

170,000

100

%

Variable costs

225,000

48.91

174,000

60

51,000

30

Contribution margin

$

235,000

51.09

%

$

116,000

40

%

$

119,000

70

%

Fixed costs traceable to divisions

142,500

30.98

60,900

21

81,600

48

Division responsibility margin

$

92,500

20.11

%

$

55,100

19

%

$

37,400

22

%

Common fixed costs

50,000

10.87

Income from operations

$

42,500

9.24

%

Profit Centers

Division 1

Product A

Product B

Dollars

%

Dollars

%

Dollars

%

Sales

$

290,000

100

%

$

116,000

100.00

%

$

174,000

100.00

%

Variable costs

174,000

60

52,200

45.00

121,800

70.00

Contribution margin

$

116,000

40

%

$

63,800

55.00

%

$

52,200

30.00

%

Fixed costs traceable to products

40,600

14

12,180

10.50

28,420

16.33

Product responsibility margin

$

75,400

26

%

$

51,620

44.50

%

$

23,780

13.67

%

Common fixed costs

20,300

7

Responsibility margin for division

$

55,100

19

%

Instructions

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.)

Expected change in responsibility margin

Product A

$ 19000

Product B

$ 9000

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.)

BUTTERFIELD, INC.

Income Statement by Divisions

For the Month Ended March 31

Divisions

Butterfield, Inc.

Division 1

Division 2

Dollars

Percent

Dollars

Percent

Dollars

Percent

(Click to select)Fixed costs traceable to divisionsContribution marginSalesVariable costsCommon costs

$

$

$

(Click to select)Variable costsCommon costsFixed costs traceable to divisionsSalesContribution margin

(Click to select)Variable costsContribution marginCommon costsFixed costs traceable to divisionsSales

$

$

$

(Click to select)Variable costsFixed costs traceable to divisionsSalesContribution marginCommon costs

Division responsibility margin

$

$

$

(Click to select)Common costsVariable costsFixed costs traceable to divisionsContribution marginSales

Income from operations

$