Question

THis is all the information and problems are below:

Business Segments

The Company operates in the following three business segments: Consumer Floral, Gourmet Food and Gift Baskets, and BloomNet Wire Service. The Consumer Floral segment includes the operations of the Company’s flagship brand, 1-800-Flowers.com, FruitBouquets.com and Flowerama, while the Gourmet Food and Gift Baskets segment includes the operations of Harry & David (which includes Wolferman’s®, Moose Munch and Stockyards.com), Cheryl’s (which includes Mrs. Beasley’s), The Popcorn Factory, DesignPac and 1-800-Baskets. The BloomNet Wire Service segment includes the operations of BloomNet and Napco.

On May 30, 2017 the Company sold its Fannie May subsidiary which was previously included within the Gourmet Food and Gift Baskets segment.

The Company’s Products and Service Offerings

The Company offers a wide range of products including fresh-cut flowers, floral and fruit arrangements and plants, gifts, popcorn, gourmet foods and gift baskets, cookies, chocolates, candy, wine, and gift-quality fruit. In order to maximize sales opportunities, products are not exclusive to certain brands, and may be sold across business categories. The Company’s differentiated and value-added product offerings create the opportunity to have a relationship with customers who purchase items not only for gift-giving occasions but also for everyday consumption. The Company’s merchandising team works closely with manufacturers and suppliers to select and design its floral, gourmet foods and gift baskets, as well as other gift-related products that accommodate our customers' needs to celebrate a special occasion or convey a sentiment. As part of this continuing effort, the Company intends to continue to develop differentiated products and signature collections that customers have embraced and come to expect, while eliminating marginal performers from its product offerings. During fiscal 2017, 2016 and 2015 approximately 1%, 1% and 2% respectively, of consolidated net revenue came from international sources.

Flowers and Plants.

The Company offers fresh-cut flowers and floral and fruit arrangements for all occasions and holidays, available for same-day delivery. The Company provides its customers with a choice of florist designed products, including traditional floral and gift offerings and the Company’s line of fruit arrangements under the Fruit Bouquets® brand (www.fruitbouquets.com), and flowers delivered fresh from the farm. The Company also offers a wide variety of popular plants to brighten the home and/or office, and accent gardens and landscapes.

Gourmet Foods and Gift Baskets.

The Company manufactures premium cookies and baked gift items under the Cheryl’s and Mrs. Beasley’s brands, which are delivered in beautiful and innovative gift baskets and containers, providing customers with a variety of assortments to choose from. The Popcorn Factory brand pops premium popcorn and specialty snack products. The 1-800-BASKETS.COM® brand features a collection of gourmet gift baskets and related products confected by DesignPac, as well as through third parties. Harry & David is a vertically integrated multi-channel specialty retailer and producer of branded premium gift-quality fruit, food products and gifts marketed under the Harry & David®, Wolferman’s® and Cushman’s® and MooseMunch® brands. The Company also licenses the Stockyards name through which it sells premium meats. Many of the Company’s gourmet products are packaged in seasonal, occasion specific or decorative tins, fitting the “giftable” requirement of individual customers, while also adding the capability to customize the tins with corporate logos and other personalized features for the Company’s corporate customers’ gifting needs.

BloomNet Products and Services.

The Company’s BloomNet business provides its members with products and services, including: (i) clearinghouse services, consisting of the settlement of orders between sending florists (including the 1-800-Flowers.com brand) and receiving florists, (ii) advertising, in the form of member directories, including the industry’s first on-line directory, (iii) communication services, by which BloomNet florists are able to send and receive orders and communicate between members, using Bloomlink®, the Company’s proprietary electronic communication system, (iv) other services including web hosting, marketing services and point of sale, and (v) wholesale products, which consist of branded and non-branded floral supplies, enabling member florists to reduce their costs through 1-800-Flowers purchasing leverage, while also ensuring that member florists will be able to fulfill 1-800-Flowers.com brand orders based on recipe specifications. While maintaining industry-high quality standards for its 1-800- Flowers.com brand customers, the Company offers florists a compelling value proposition, offering products and services that its florists need to grow their business and to enhance profitability.

Note 15. Business Segments

The Company’s management reviews the results of the Company’s operations by the following three business segments: • 1-800-Flowers.com Consumer Floral, • BloomNet Wire Service, and • Gourmet Food and Gift Baskets Segment performance is measured based on contribution margin, which includes only the direct controllable revenue and operating expenses of the segments. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead (see (a) below), nor does it include depreciation and amortization, other (income) expense, net and income taxes, or stock-based compensation which is included within corporate overhead. Assets and liabilities are reviewed at the consolidated level by management and not accounted for by segment.

Net revenues July 2, 2017 July 3, 2016 June 28, 2015 (in thousands) Years ended

Net revenues: 1-800-Flowers.com Consumer Floral $ 437,132 $ 418,492 $ 422,199

BloomNet Wire Service 87,700 85,483 85,968

Gourmet Food & Gift Baskets 670,677 670,453 613,953

Corporate 1,102 1,066 1,020

Intercompany eliminations (2,986) (2,470) (1,634)

Total net revenues $ 1,193,625 $ 1,173,024 $ 1,121,506

Operating Income from Continuing Operations July 2, 2017 July 3, 2016 June 28, 2015 (in thousands) Years ended

Segment Contribution Margin:

1-800-Flowers.com Consumer Floral $ 51,860 $ 50,773 $ 43,529

BloomNet Wire Service 32,383 30,629 29,398

Gourmet Food & Gift Baskets 77,312 79,398 74,889

Segment Contribution Margin Subtotal 161,555 160,800 147,816

Corporate (a) (81,820) (85,134) (81,075)

Depreciation and amortization (33,376) (32,384) (29,124)

Operating income $ 46,359 $ 43,282 $ 37,617

(a) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-Based Compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific segment

In this assignment we will be completing an Office Margin Statement similar to Exhibit 11-11 on page 392. I used the information from the segment reporting footnote for 1-800-FLOWERS.COM, Inc. I have included the source of the information, but I needed to adjust some of the numbers to make it less complex.

First, read the footnote information in the file, “Information for Business Assignment 2.122”.

Complete #1 and 2 below.

1.1-800-FLOWERS.COM, Inc. divides its business into three segments. For each segment indicate 2 products or services that are provided by that segment (6 points)

Consumer Floral

i.

ii

Bloom Net Wire Service

ii

Gourmet Food & Gifts

ii

2.1-800-FLOWERS.COM, Inc. bases the performance of its segments based upon what for each segment? (2 points)

Now move to the schedule below. It is similar to Exhibit 11-11 in our text.

3.You will need to compute traceable variable costs for each segment and office margin for each segment. Remember that common expenses and operating income is not given by segment, as we see in Exhibit 11-11. (12 points)

1-800-FLOWERS.COM, Inc.
Office Margin Statement
for the year ended July 2, 2017
	Consumer	Bloom Net	Gourmet
	Floral	Wire Service	Food & Gifts	Total
Net Revenues	$437,132	$       87,700	$     670,677	$ 1,195,509
Traceable variable costs				1,033,954
Office contribution margin	51,860	32,383	77,312	161,555
Traceable fixed costs	27,000	14,000	40,820	81,820
Office margin				79,735
Common expenses				33,376
Operating income				$       46,359

Using this information from the schedule you completed in #3, compute the following showing your computations. Add lines as needed. Each question 4 and 5 are worth 9 points each and 6 and 7 are worth 6 points each.

4. Contribution Margin ratio for each segment:

A. Consumer Floral

      B. Bloom Net Wire Service

      C. Gourmet Food & Gifts

5. Break-even point in sales dollars for each segment:

     

      A. Consumer Floral

      B. Bloom Net Wire Service

      C. Gourmet Food & Gifts

6. Margin of safety in dollars for each segment.

      A. Consumer Floral

      B. Bloom Net Wire Service

      C. Gourmet Food & Gifts

7. Margin of safety ratio for each segment

      A. Consumer Floral

      B. Bloom Net Wire Service

      C. Gourmet Food & Gifts

Answer 1

4. Contribution margin ratio = contribution margin / sales Consumer Floral = 51860/437132 = 11.86%

Bloom Net Wire Service = 32383/87700 = 36.92%

Gourmet Food & Gifts = 77312/670677 = 11.53%

5. Breakeven in dollars = fixed cost / contribution margin ratio

Consumer Floral = 27000/11.86% = 227656

Bloom Net Wire Service = 14000/36.92% =37920

Gourmet Food & Gifts = 40820/11.53% = 354033

6. Margin of safety = sales - breakeven in dollars

Consumer Floral = 437132-227656 = 209476

Bloom Net Wire Service = 87700-37920 = 49780

Gourmet Food & Gifts = 670677-354033 = 316644

7. Margin of safety ratio = margin of safety / sales

Consumer Floral = 209476/437132 = 47.92%

Bloom Net Wire Service = 49780/87700 = 56.76%

Gourmet Food & Gifts = 316644/670677 = 47.21%