Grael Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows: Tech Support Department $1,130,400 Purchasing Department 231,000 Other corporate administrative expenses 585,000 Total corporate expense $1,946,400 The other corporate administrative expenses include officers’ salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows: Tech Support Purchasing Consumer Division 440 computers 5,400 purchase orders Commercial Division 280 10,000 Total 720 computers 15,400 purchase orders The service department charges of the Tech Support Department and the Purchasing Department are considered controllable by the divisions. Corporate administrative expenses are not considered controllable by the divisions. The revenues, cost of goods sold, and operating expenses for the two divisions are as follows: Consumer Commercial Revenues $9,076,700 $6,832,700 Cost of goods sold 5,042,600 3,450,200 Operating expenses 1,780,400 1,708,000 Prepare the divisional income statements for the two divisions. Do not round your interim calculations. GRAEL TECHNOLOGY Divisional Income Statements For the Year Ended December 31, 20Y7 Consumer Division Commercial Division $ $ $ $ Income from operations before service department charges $ $ Less service department charges: $ $ $ $

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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Grael Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows:

Tech Support Department	$1,130,400
Purchasing Department	231,000
Other corporate administrative expenses	585,000
Total corporate expense	$1,946,400

The other corporate administrative expenses include officers’ salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows:

	Tech Support	Purchasing
Consumer Division	440	computers	5,400	purchase orders
Commercial Division	280		10,000
Total	720	computers	15,400	purchase orders

The service department charges of the Tech Support Department and the Purchasing Department are considered controllable by the divisions. Corporate administrative expenses are not considered controllable by the divisions. The revenues, cost of goods sold, and operating expenses for the two divisions are as follows:

	Consumer	Commercial
Revenues	$9,076,700		$6,832,700
Cost of goods sold	5,042,600		3,450,200
Operating expenses	1,780,400		1,708,000

Prepare the divisional income statements for the two divisions. Do not round your interim calculations.

GRAEL TECHNOLOGY
Divisional Income Statements
For the Year Ended December 31, 20Y7
		Consumer Division		Commercial Division
		$		$

		$		$

Income from operations before service department charges		$		$
Less service department charges:
	$		$

		$		$

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