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 information, are as follows: Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $252,000; Summer Sports Division, $326,000. Transportation expense—charged back to divisions at a charge rate of $7.40 per bill of lading: Winter Sports Division, 17,200 bills of lading; Summer Sports Division, 18,700 bills of lading. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $6.00 per invoice: Winter Sports Division, 11,500 sales invoices; Summer Sports Division, 17,500 sales invoices. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 102,000 square feet; Summer Sports Division, 118,000 square feet. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Round your interim calculations to two decimal places, if required. Glades Sporting Goods Co. Divisional Income Statements For the Year Ended December 31, 20Y8 Winter Sports Division Summer Sports Division Sales $ $ Cost of goods sold Gross profit $ $ Divisional selling expenses $ $ Divisional administrative expenses Operating expenses $ $ Income from operations before service department charges $ $ Less service department charges: Advertising expense $ $ Transportation expense Accounts receivable collection expense Warehouse expense Total service department charges $ $ Income from operations $ $ Feedback For each division: Sales minus cost of goods sold equals gross profit minus divisional selling and administrative expenses equals income from operations before service department charges. To determine each division's transportation charge, multiply the transportation rate (total charge ÷ total bills of lading) by the number of bills of lading in each division. Repeat this process for accounts receivable collection and warehouse service department charges. Add these three service allocations to the advertising expense (given) for each division to obtain service department charges that are subtracted from income from operations before service department charges. Provide supporting calculations for service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar. Glades Sporting Goods Co. Supporting Calculations For the Year Ended December 31, 20Y8 Winter Sports Division Summer Sports Division Total Advertising expense $ $ $ 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 $ $ $

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 information, are as follows: Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $252,000; Summer Sports Division, $326,000. Transportation expense—charged back to divisions at a charge rate of $7.40 per bill of lading: Winter Sports Division, 17,200 bills of lading; Summer Sports Division, 18,700 bills of lading. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $6.00 per invoice: Winter Sports Division, 11,500 sales invoices; Summer Sports Division, 17,500 sales invoices. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 102,000 square feet; Summer Sports Division, 118,000 square feet. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Round your interim calculations to two decimal places, if required. Glades Sporting Goods Co. Divisional Income Statements For the Year Ended December 31, 20Y8 Winter Sports Division Summer Sports Division Sales $ $ Cost of goods sold Gross profit $ $ Divisional selling expenses $ $ Divisional administrative expenses Operating expenses $ $ Income from operations before service department charges $ $ Less service department charges: Advertising expense $ $ Transportation expense Accounts receivable collection expense Warehouse expense Total service department charges $ $ Income from operations $ $ Feedback For each division: Sales minus cost of goods sold equals gross profit minus divisional selling and administrative expenses equals income from operations before service department charges. To determine each division's transportation charge, multiply the transportation rate (total charge ÷ total bills of lading) by the number of bills of lading in each division. Repeat this process for accounts receivable collection and warehouse service department charges. Add these three service allocations to the advertising expense (given) for each division to obtain service department charges that are subtracted from income from operations before service department charges. Provide supporting calculations for service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar. Glades Sporting Goods Co. Supporting Calculations For the Year Ended December 31, 20Y8 Winter Sports Division Summer Sports Division Total Advertising expense $ $ $ 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 $ $ $

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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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 information, are as follows:

Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $252,000; Summer Sports Division, $326,000.
Transportation expense—charged back to divisions at a charge rate of $7.40 per bill of lading: Winter Sports Division, 17,200 bills of lading; Summer Sports Division, 18,700 bills of lading.
Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $6.00 per invoice: Winter Sports Division, 11,500 sales invoices; Summer Sports Division, 17,500 sales invoices.
Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 102,000 square feet; Summer Sports Division, 118,000 square feet.

Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Round your interim calculations to two decimal places, if required.

Glades Sporting Goods Co.
Divisional Income Statements
For the Year Ended December 31, 20Y8
	Winter Sports Division	Summer Sports Division
Sales	$	$
Cost of goods sold
Gross profit	$	$
Divisional selling expenses	$	$
Divisional administrative expenses
Operating expenses	$	$
Income from operations before service department charges	$	$
Less service department charges:
Advertising expense	$	$
Transportation expense
Accounts receivable collection expense
Warehouse expense
Total service department charges	$	$
Income from operations	$	$

Feedback

For each division: Sales minus cost of goods sold equals gross profit minus divisional selling and administrative expenses equals income from operations before service department charges. To determine each division's transportation charge, multiply the transportation rate (total charge ÷ total bills of lading) by the number of bills of lading in each division. Repeat this process for accounts receivable collection and warehouse service department charges. Add these three service allocations to the advertising expense (given) for each division to obtain service department charges that are subtracted from income from operations before service department charges.

Provide supporting calculations for service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.

Glades Sporting Goods Co.
Supporting Calculations
For the Year Ended December 31, 20Y8
	Winter Sports Division	Summer Sports Division	Total
Advertising expense	$	$	$
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	$	$	$

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