Performance Eval - Decentralized Ops: Championship Sports Inc. operates two divisions - the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance aa of December 31, 20Y9, the end of tthe fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales - Winter Sports Division $34,650,000 Sales - Summer Sports Division $38,280,000 Cost of Goods Sold - Winter Sports Division 20,790,000 Cost of Goods Sold - Summer Sports Division 22,110,000 Sales Expense - Winter Sports Division 5,940,000 Sales Expense - Summer Sports Division 5,280,000 Administrative Expense - Winter Sports Division 3,465,000 Administrative Expense - Summer Sports Division 3,399,000 Advertising Expense 890,000 Transportation Expense 387,600 Accounts Receivable Collection Expense 279,000 Warehouse Expense 3,300,000 The bases to be used in allocating expenses, together with other information, are as follows: a. Advertising expense - incurred at headquarters, allocated to divisions on the basis of usages: Winter Sports Divsion, $418,000; Summer Sports Division, $472,000. b. Transportation expense - allocated to the divisions at a rate of $12 per bill of lading: Winter sports division, 15,400 bills of lading; Summer sports division, 16,900 bills of lading. c. Accounts receivable collection expense - incurred at headquarters, allocated to divisions at a rate of $9 per invoice: Winter sports division, 14,300 sales invoices; Summer sports division, 16,700 sales invoices. d. Warehouse expense - allocated to divisions on the basis of floor space used in storing division products: Wintter sports division, 180,000 square feet; Summer sports divisions, 220,000 square feet.

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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Performance Eval - Decentralized Ops:

Championship Sports Inc. operates two divisions - the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance aa of December 31, 20Y9, the end of tthe fiscal year, after all adjustments, including those for inventories, were recorded and posted:

Sales - Winter Sports Division	$34,650,000
Sales - Summer Sports Division	$38,280,000
Cost of Goods Sold - Winter Sports Division	20,790,000
Cost of Goods Sold - Summer Sports Division	22,110,000
Sales Expense - Winter Sports Division	5,940,000
Sales Expense - Summer Sports Division	5,280,000
Administrative Expense - Winter Sports Division	3,465,000
Administrative Expense - Summer Sports Division	3,399,000
Advertising Expense	890,000
Transportation Expense	387,600
Accounts Receivable Collection Expense	279,000
Warehouse Expense	3,300,000

The bases to be used in allocating expenses, together with other information, are as follows:

a. Advertising expense - incurred at headquarters, allocated to divisions on the basis of usages: Winter Sports Divsion, $418,000; Summer Sports Division, $472,000.

b. Transportation expense - allocated to the divisions at a rate of $12 per bill of lading: Winter sports division, 15,400 bills of lading; Summer sports division, 16,900 bills of lading.

c. Accounts receivable collection expense - incurred at headquarters, allocated to divisions at a rate of $9 per invoice: Winter sports division, 14,300 sales invoices; Summer sports division, 16,700 sales invoices.

d. Warehouse expense - allocated to divisions on the basis of floor space used in storing division products: Wintter sports division, 180,000 square feet; Summer sports divisions, 220,000 square feet.

Provide supporting schedules for determining support department allocations. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.
Championship Sports Inc.
Support Department Allocations
For the Year Ended December 31, 20Y9
Winter Sports Division
Summer Sports Division
Total
Advertising expense
$4
2$
Transportation rate per bill of lading
$
Number of bills of lading
Transportation expense
$
Accounts receivable collection rate
Number of sales invoices
Accounts receivable collection expense
Warehouse rate per sq. ft.
Number of square feet
Warehouse expense

Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Do not round your interim calculations.
Championship Sports Inc.
Divisional Income Statements
For the Year Ended December 31, 20Y9
Winter Sports Division
Summer Sports Division
Sales
$
Cost of goods sold
Gross profit
2$
Divisional selling and administrative expenses:
Divisional selling expenses
Divisional administrative expenses
Total divisional selling and administrative expenses
$
Operating income before support department allocations $
2$
Support department allocations:
Advertising expense
Transportation expense
Accounts receivable collection expense
Warehouse expense
Total support department allocations
$
Operating income

Expert Solution

Step 1

Divisional income statement shows all incomes and expenses related to that particular division and at the end it shows net income or loss at division level.