Reference no: EM132670131

Question: Martini Ltd is organised into three divisions: Metro, Regional and Rural. Data for these divisions for the 2020 financial year end were as follows:

                                                                           Metro            Regional             Rural

Production and sales in units                                 52,500             36,000             35,000

Average selling price per unit                                    $28                   $24                 $22

Average variable manufacturing cost per unit              $12                   $10                 $8

Average variable selling cost per unit                          $5                     $3.5                $3

Fixed expenses controlled by division managers       $325,000            $250,000       $220,000

Fixed expenses allocated to the divisions                 $200,000            $180,000       $140,000

Common fixed expenses: $160,000

Required: a. a profit statement that highlights the performance of the three divisions and the performance of three divisional managers.

b. Explain why it is important to distinguish between the performance of division managers and the performance of divisions.