31Liam O’Connor is responsible for managing the residential construction division of a large diversified real estate development company. Liam’s business unit would most accurately be described as a(n):
A)cost center.
B)revenue center.
C)profit center.
D)investment center.
32John McGee is responsible for managing the Midwest sales region of a home health care service company. His business unit would most accurately be described as a(n):
A)cost center.
B)revenue center.
C)profit center.
D)investment center.
33Henderson Industrial Products Company has three divisions—Construction, Manufacturing, and
Military. It has also identified costs associated with several common service departments and has traced those costs to each division. The Construction Division Income Statement is shown here:
Construction Division Income Statement
|
|
|
|
Division Total
|
Civil
|
Residential
|
Commercial
|
Sales revenue
|
$350,000
|
$36,000
|
$98,000
|
$216,000
|
Variable expenses
|
$125,000
|
$24,000
|
$41,000
|
$60,000
|
Contribution margin
|
$225,000
|
$12,000
|
$57,000
|
$156,000
|
Traceable fixed expenses
|
$144,000
|
$20,250
|
$40,500
|
$83,250
|
Product margin
|
$81,000
|
($8,250)
|
$16,500
|
$72,750
|
Non-traceable expenses
|
$48,000
|
|
|
|
Division margin
|
$33,000
|
|
|
|
|
|
|
|
|
Henderson is now consolidating the division data into a company income statement. The format is shown below, including the data from the other two divisions—Manufacturing and Military. Using this format, please insert the relevant data for the Construction Division and complete the statement.
Henderson Industrial Products - Income Statement
|
|
|
|
Company Total
|
Construction
|
Manufacturing
|
Military
|
Sales revenue
|
|
|
$220,000
|
$88,000
|
Variable expenses
|
|
|
$52,000
|
$44,000
|
Contribution margin
|
|
|
$168,000
|
$44,000
|
Traceable fixed expesnes
|
|
|
$144,000
|
$48,000
|
Divisional segment margin
|
|
|
$24,000
|
($4,000)
|
Non-traceable expenses
|
$21,000
|
|
|
|
Net operating income
|
|
|
|
|
|
|
|
|
|
34Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions—Construction, Manufacturing, and Military. The Construction
Division has been allocated a total of $192,000 of costs from the procurement department. Of that amount$144,000 is considered traceable to the three product types within the division—Civil Construction, Residential Construction, and Commercial Construction. The traceable amounts are further allocated to the three product types within the division as shown here:
Construction Division
|
|
|
Product lines
|
Revenues
|
Variable Expenses
|
Assigned Costs
|
Civil
|
$36,000
|
$24,000
|
$20,250
|
Residential
|
$98,000
|
$41,000
|
$40,500
|
Commercial
|
$216,000
|
$60,000
|
$83,250
|
Total
|
$350,000
|
$125,000
|
$144,000
|
|
|
|
|
Please complete a performance report, the divisional income statement, for the Construction Division, using the format shown here:
Construction Division Income Statement
|
|
|
|
Division Total
|
Civil
|
Residential
|
Commercial
|
Sales revenue
|
|
|
|
|
Variable expenses
|
|
|
|
|
Contribution margin
|
|
|
|
|
Traceable fixed expenses
|
|
|
|
|
Product margin
|
|
|
|
|
Non-traceable expenses
|
|
|
|
|
Division margin
|
|
|
|
|
|
|
|
|
|