Power Sports Company has two divisions, Wholesale and Retail, and two corporate service departments, Tech Support and Accounts Payable. The corporate expenses for the year ended December 31, 20Y7, are as follows: Tech Support Department $1,146,600 Accounts Payable Department 522,000 Other corporate administrative expenses 717,000 Total corporate expense $2,385,600 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 Accounts Payable Department charges divisions for services, based on the number of checks issued. The usage of service by the two divisions is as follows: Tech Support Accounts Payable Wholesale Division 480 computers 6,100 checks Retail Division 300 11,300 Total 780 computers 17,400 checks The service department charges of the Tech Support Department and the Accounts Payable 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: Wholesale Retail Revenues $10,450,100 $9,038,900 Cost of goods sold 5,805,600 4,564,200 Operating expenses 2,049,800 2,259,500 Prepare the divisional income statements for the two divisions.

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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Power Sports Company has two divisions, Wholesale and Retail, and two corporate service departments, Tech Support and Accounts Payable. The corporate expenses for the year ended December 31, 20Y7, are as follows:

Tech Support Department	$1,146,600
Accounts Payable Department	522,000
Other corporate administrative expenses	717,000
Total corporate expense	$2,385,600

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 Accounts Payable Department charges divisions for services, based on the number of checks issued. The usage of service by the two divisions is as follows:

	Tech Support	Accounts Payable
Wholesale Division	480	computers	6,100	checks
Retail Division	300		11,300
Total	780	computers	17,400	checks

The service department charges of the Tech Support Department and the Accounts Payable 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:

	Wholesale	Retail
Revenues	$10,450,100	$9,038,900
Cost of goods sold	5,805,600	4,564,200
Operating expenses	2,049,800	2,259,500

Prepare the divisional income statements for the two divisions.

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