Question

The following information was taken from the segmented income statement of Restin, Inc., and the company's three divisions:

Restin, Inc. Los Angeles Division Bay Area Division Central Valley Division
Revenues $1,216,000 $352,000 $387,000 $477,000
Variable operating expenses 683,600 193,600 215,000 275,000
Controllable fixed expenses 267,000 84,000 94,000 89,000
Noncontrollable fixed expenses 117,000 34,000 39,000 44,000

In addition, the company incurred common fixed costs of $23,700. Assuming use of a responsibility accounting system. What amounts should be used to evaluate the performance of the Los Angeles division manager?

Answer 1

Los Angeles Division

Particulars Amount

Revenue $352,000

Less: Variable operating expenses $193,600

Less: Controllable fixed expenses $84,000

Controllable profit margin $74,400

Non-controllable and common fixed cost is not related to a particular division, therefore, will not br considered while evaluating the performance of a division manager.