Reference no: EM131185234

The president of Cold Moo Ice Cream Company, a chain of ice cream stores in the Midwest, was unhappy with the actual six-month profit figures for the company recently prepared by the CFO. The president asked the CFO for a profit breakdown, by store, of the actual six-month results. When the president received the report, he was extremely upset and called the CFO into his office.The president stated, “These reports show that each store in the chain is profitable, but our company results are unprofitable! How can this be?” The CFO pointed out that each store was allowed to set prices for ice cream based on its cost structure. However, the stores’ cost structures did not include headquarters costs or the costs of advertising and delivery of products. What are the three characteristics for operating a successful responsibility accounting system? Consider whether the accounting system at Cold Moo Ice Cream Company includes the three characteristics of a successful responsibility accounting system. How could the responsibility accounting system at Cold Moo be improved? Chocolatiers Company produces two products: Solid chocolate and powdered chocolate. Cost and revenue data for each product line for the current month are as follows: Product Lines Jewelry Apparel Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $800,000 $450,000 Variable costs as a percentage of sales . . . . . . . . . . . . . . . . . . . . . . . 55% 28% Fixed costs traceable to product lines . . . . . . . . . . . . . . . . . . . . . . . . $200,000 $250,000 In addition, fixed costs that are common to both product lines amount to $125,000. Instructions a. Prepare Chocolatiers’s responsibility income statement for the current month. Report the responsibility margin for each product line and income from operations for the company as a whole. Also include columns showing all dollar amounts as percentages of sales. b. According to the analysis performed in part a, which product line is more profitable? Should the common fixed costs be considered when determining the profitability of individual product lines? Why or why not? c. Chocolatiers has $15,000 to be used in advertising for one of the two product lines and expects that this expenditure will result in additional sales of $50,000. How should the company decide which product line to advertise?