Television Department Net Sales Revenues Cost of Sales Gross

Import Distributors, Inc.Import Distributors, Inc. (IDI), imported appliances and distributed them to retail stores in the Rocky Mountain States. IDI carried three broad lines of merchandise audio equipment (tuners, tape decks, CD players, etc.), television equipment (including videotape recorders), and kitchen appliances (refrigerators, freezers, and stoves that were more compact then U.S. models). Each line accounted for about one-third of total IDI sales revenues. Although each line was referred to by IDI managers as “department,” until 1994 the company did not prepare departmental income statements.In late 1993, departmental accounts were set up in anticipation of preparing quarterly income statements by department starting in 1994. In early April of 1994, the first such statements were distributed to the management group. Although in the first quarter of 1994 IDI had earned net income amounting to 4.3% of sales, the television department had shown a gross margin that was much too small to cover the department’s operating expenses. Look at exhibit 1

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