Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. How should the cost of national advertising by Whole Foods impact the performance report (and segment margin) for each store? Original blog posting (October 24, 2014)

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Whole Foods Market, Inc. Supermarket chain based in Austin, Texas 381 stores in the US Specializes in natural and organic food Annual sales of $13 billion

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Rolled out first national advertising campaign in October 2014 Estimated $20 million cost Slogan “Value matters”

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question 1 Would each of Whole Foods’ stores be considered to be a cost center, a revenue center, a profit center, or an investment center? Explain.

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question 2 Assume that Whole Foods prepares performance reports for each of its stores. Would you expect to see a portion of the national advertising campaign cost in each store’s segment margin? Why or why not?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question 3 Assume now that the advertising campaign turns out to be quite successful because it increases Whole Foods’ visibility and results in increased sales across all stores in the U.S. Should the U.S. store managers be evaluated on the variance between the budgeted national advertising costs and the actual national advertising costs? Why or why not?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question Recap 1.Would each of Whole Foods’ stores be considered to be a cost center, a revenue center, a profit center, or an investment center? Explain. 2.Assume that Whole Foods prepares performance reports for each of its stores. Would you expect to see a portion of the national advertising campaign cost in each store’s segment margin? Why or why not? 3.Assume now that the advertising campaign turns out to be quite successful because it increases Whole Foods’ visibility and results in increased sales across all stores in the U.S. Should the U.S. store managers be evaluated on the variance between the budgeted national advertising costs and the actual national advertising costs? Why or why not?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at Related video resources can be found at Questions or comments? Contact Dr. Wendy Tietz at