Reference no: EM132845319

Question - Edith's Electronics Inc. is a consumer electronics store similar to Best Buy. The company owns 2 stores that they have set up as separate Divisions: The Whitby store and the Ajax store. The Whitby store generated 50% more in sales than the Ajax store did in November of 2020. The Ajax store sales that month was $60,000. Commission is paid at each store based upon 3% of Sales. All advertising is handled at head office in Toronto. The company has entered into a billboard campaign agreement and will be paying $2,000 per month throughout 2020 and 2021. Rent at Whitby store is $5,000/month but the lease agreement also requires an additional payment of 1% of monthly sales. Rent at the Ajax store is simply $3,000/month. The Store Manager at Whitby is paid $60,000 a year. The Ajax Store Manager is paid $4,000 per month. The Cost of Goods Sold during the month at Whitby was $30,000 and $20,000 at Ajax. The cost of annual Insurance is $25,200, $1,200 for head office premises and the remainder split evenly between the 2 stores. The President of the Company makes $120,000 per year.

Required -

i) Prepare a Segmented Income Statement for the Company and its Divisions using the Contribution Margin format.

ii) If the Company was planning to open a new store in Pickering in 2021, how would this impact the Traceable Fixed Costs at the Whitby and Ajax stores? Explain your answer.