• District expenses were allocated to the stores based on sales.• New England Region general and administrative expenses of $162,000 were allocated to the Coastal District. These expenseswere, in turn, allocated equally to the district's three stores.Required:1. Prepare the May segmented income statement for the Coastal District and for the New Haven and Boston stores.2. Compute the Portland store's operating income for May.4. The assistant controller for the New England Region, Jack Isner, has been a close friend of the New Haven store manager for over20 years. When Isner saw the segmented income statement (as prepared in requirement 1), he realized that the New Haven storemanager had really gone overboard on advertising expenditures. To make his friend look better to the regional management, hereclassified $25,000 of the advertising expenditures as miscellaneous expenses, and buried them in rent and other costs. Theassistant controller's actions violate several standards of ethical conduct for management accountants, including the following: Cathy's Classic Clothes is a retailer that sells to professional women in the northeast. The firm leases space for stores in upscaleshopping centers, and the organizational structure consists of regions, districts, and stores. Each region consists of two or moredistricts; each district consists of three or more stores. Each store, district, and region has been established as a profit center. At all|levels, the company uses a responsibility-accounting system focusing on information and knowledge rather than blame and control.Each year, managers, in consultation with their supervisors, establish financial and nonfinancial goals, and these goals are integratedinto the budget. Actual performance is measured each month.The New England Region consists of the Coastal District and the Inland District. The Coastal District includes the New Haven, Boston,and Portland stores. The Coastal District's performance has not been up to expectations in the past. For the month of May, the districtmanager has set performance goals with the managers of the New Haven and Boston stores, who will receive bonuses if certainperformance measures are exceeded. The manager in Portland decided not to participate in the bonus scheme. Since the districtmanager is unsure what type of bonus will encourage better performance, the New Haven manager will receive a bonus based onsales in excess of budgeted sales of $570,000, while the Boston manager will receive a bonus based on operating income in excessof budget. The company's operating income goal for each store is 12 percent of sales. The budgeted sales revenue for the Bostonstore is $530,000.Other pertinent data for May are as follows:• Coastal District sales revenue was $1,590,000, and its cost of goods sold amounted to $632,750.• The Coastal District spent $105,000 on advertising.• General and administrative expenses for the Coastal District amounted to $180,000.• At the New Haven store, sales were 45 percent of Coastal District sales, while sales at the Boston store were 40 percent of districtsales. The cost of goods sold in both New Haven and Boston was 44 percent of sales.• Variable selling expenses (sales commissions) were 6 percent of sales for all stores, districts, and regions.• Variable administrative expenses were 2.6 percent of sales for all stores, districts, and regions.• Maintenance cost includes janitorial and repair services and is a direct cost for each store. The store manager has complete controlover this outlay. Maintenance costs were incurred as follows: New Haven, $7,600; Boston, $800; and Portland, $4,700.• Advertising is considered a direct cost for each store and is completely under the control of the store manager. The New Havenstore.spent two-thirds of the Coastal District total outlay for advertising, which was 10 times the amount spent in Boston onadvertising.• Coastal District rental expense amounted to $130,000.• The rental expenses at the New Haven store were 40 percent of the Coastal District's total, while the Boston store incurred 30percent of the district total.• District expenses were allocated to the stores based on sales.• New England Region general and administrative expenses of $162,000 were allocated to the Coastal District. These expenses

Income Statement The purpose of preparing the income statement is to know the net income which was…

Answered: • District expenses were allocated to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Using the data below for the Ace Guitar Company: A Region B Region Sales $560,000 $840,000 Cost of goods sold 212,800 319,200 Selling expenses 134,400 201,600 Support department expenses: Purchasing $235,200 Payroll accounting 156,800 Allocate support department expenses proportional to the sales of each region. Determine the divisional operating income for the A and B regions. For interim calculations, round percentages to two decimal places and all other amounts to the nearest whole dollar. A Region Operating Income $fill in the blank 1 B Region Operating Income
Using the data below for the Ace Guitar Company: A Region B Region Sales $638,000 $522,000 Cost of goods sold 242,400 198,400 Selling expenses 153,100 125,300 Service department expenses Purchasing $194,900 Payroll accounting 129,900 Allocate service department expenses proportional to the sales of each region. Determine the divisional income from operations for the A and B regions. For interim calculations, round percentages to one decimal place. a) A Region b) B Region
Divisional Income Statements The following data were summarized from the accounting records for Ruiz Industries Inc. for the year ended November 30, 20Y8: Cost of goods sold: Support department allocations: Commercial Division $3,400,000 Commercial Division $800,000 Residential Division 1,800,000 Residential Division 200,000 Administrative expenses: Sales: Commercial Division $750,000 Commercial Division $6,120,000 Residential Division 375,000 Residential Division 2,850,000 Prepare divisional income statements for Ruiz Industries Inc. Ruiz Industries Inc. Divisional Income Statements For the Year Ended November 30, 20Y8 Commercial Division Residential Division $fill in the blank 2 $fill in the blank 3 fill in the blank 5 fill in the blank 6 $fill in the blank 8 $fill in the blank 9 fill in the blank 11 fill in the blank 12 $fill in the blank 14 $fill in the blank 15 fill in the blank 17 fill in…
Service Department Charges In divisional income statements prepared for LeFevre Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $63,492, and the Purchasing Department had expenses of $26,840 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial GovernmentContract Sales $561,000 $743,000 $1,707,000 Number of employees: Weekly payroll (52 weeks per year) 205 85 90 Monthly payroll 36 47 34 Number of purchase requisitions per year 2,600 1,800 1,700 a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. Residential Commercial…
2. Using the DuPont formula, determine the profit margin, investment turnover, and return on investment for each division. (Round to 2nd decimal places). 3. If management desires a minimum acceptable rate of return of 8%, determine the residual income for each division. 4. Discuss the evaluation of the two divisions, using the performance measures determined in parts (1), (2), and (3).
Lucia Company has two service departments: Office and Purchasing. Total expenses for the Office is $25,000 and for Purchasing is $56,200. Expenses for the Office are allocated to operating departments based on sales. Expenses for Purchasing are allocated to operating departments based on purchase orders. Department Sales Purchase Orders Books $ 186,200 546 Magazines 95,000 364 Newspapers 98,800 390 Total $ 380,000 1,300 Allocate the expenses from (a) the Office and (b) Purchasing to each of the company's three operating departments using the given information.
Profit Center Responsibility Reporting Glades Sporting Goods Co. operates two divisions—the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of December 31, 20Y8, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales—Winter Sports Division $12,600,000 Sales—Summer Sports Division 16,300,000 Cost of Goods Sold—Winter Sports Division 7,560,000 Cost of Goods Sold—Summer Sports Division 9,454,000 Sales Expense—Winter Sports Division 2,016,000 Sales Expense—Summer Sports Division 2,282,000 Administrative Expense—Winter Sports Division 1,260,000 Administrative Expense—Summer Sports Division 1,450,700 Advertising Expense 578,000 Transportation Expense 265,660 Accounts Receivable Collection Expense 174,000 Warehouse Expense 1,540,000 The bases to be used in allocating expenses, together with other essential…
Cost Department Allocations In divisional income statements prepared for Demopolis Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $64,560, and the Purchasing Department had expenses of $40,000 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract Sales $2,000,000 $3,250,000 $2,900,000 Number of employees: Weekly payroll (52 weeks per year) 400 250 150 Monthly payroll 80 30 10 Number of purchase requisitions per year 7,500 3,000 2,000 Required: a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. Residential…
Macee Store has three operating departments, and it conducts advertising that benefits all departments. Advertising costs are $132,000. Sales for its operating departments follow. Department 1 2 3 Sales $ 245,000 450,800 284,200 How much advertising cost is allocated to each operating department if the allocation is based on departmental sales? Note: Do not round your intermediate calculations. Department Sales Percent of Total Cost Allocated 1 $ 245,000 25.00 % $ 2 450,800 46.00 % 3 284,200 29.00 % Total $ 980,000 100.00 %
Cost Department Allocations In divisional income statements prepared for Demopolis Company, the Payroll Department costs are charged back to user divisions on the basis of the number of payroll distributions, and the Purchasing Department costs are charged back on the basis of the number of purchase requisitions. The Payroll Department had expenses of $29,792, and the Purchasing Department had expenses of $15,370 for the year. The following annual data for Residential, Commercial, and Government Contract divisions were obtained from corporate records: Residential Commercial Government Contract Sales $ 321,000 $ 426,000 $ 978,000 Number of employees: Weekly payroll (52 weeks per year) 120 70 75 Monthly payroll 28 39 26 Number of purchase requisitions per year 2,200 1,600 1,500 Required: a. Determine the total amount of payroll checks and purchase requisitions processed per year by the company and each division. Residential Commercial Government Contract Total Number of payroll checks:…
Garcia Company has two operating departments (Phone and Earbuds) and one service department (Office). Its departmental income statements follow. Indirect expenses and service department expenses consist of rent, utilities, and office department expenses. GARCIA COMPANY Departmental Income Statements For Year Ended December 31 Sales Cost of goods sold Gross profit Expenses Sales salaries Supplies used Depreciation-Equipment Rent Utilities Share of office department expenses Total expenses Income Phone Earbuds Combined $ 200,000 98,000 $ 95,000 $ 295,000 58,900 102,000 36,100 156,900 138,100 20,000 8,700 28,700 1,150 450 1,600 2,100 300 2,400 7,060 3,840 10,900 2,700 1,800 4,500 10,500 4,500 43,510 19,590 $ 58,490 $ 16,510 15,000 63,100 $ 75,000 Required: Prepare a departmental contribution to overhead report. Garcia Company Departmental Contribution to Overhead For Year Ended December 31 Gross profit Direct expenses Phone Earbuds Combined 0 0 0 Total direct expenses 0 0 0 Departmental…
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