Chapter 14, Problem 14.9E

Profit center responsibility reporting
On-Demand Sports Co. operates two divisions—the Action Sports Division and the Team Sports Division. The following income and expense accounts were provided as of November 30. 20Y1, the end of the current fiscal year, after all adjustments, including those for inventories, were recorded

The bases to be used in allocating expenses, together with other essential information, are as follows
a.Advertising expense—incurred al headquarters, charged back to divisions on the basis of usage: Action Sports Division. $1,200,000; Team Sports Division, $1,800,000.

b. Transportation expense—charged hack lo divisions at a charge rale of $18.50 per bill of lading: Action Sports Division, 14.000 bills of lading; Team Sports Division. 21.400 bills of lading.
C. Accounts receivable collection expense—incurred al headquarters, charged back to divisions at a charge rate of $9-00 per invoice: Action Sports Division. 32.000 sales invoices; Team Sports Division, 12.500 sales invoices.
d. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Action Sports Division. 120.000 square feet; Team Sports Division. 80.000 square feet.
Prepare divisional income statements with two column headings: Action Sports Division and Team Sports Division. Provide supporting schedules for determining service department charges.