Reference no: EM132687275
Problem - Divisional income statements with service department charges - Ryan Snow 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, 2012, are as follows:
Tech Support Department $845,000
Accounts Payable Department 320,000
Other corporate administrative expenses 502,300
Total corporate expense $1,667,300
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:
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Tech Support
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Accounts Payable
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Wholesale Division
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400 computers
|
5,600 checks
|
|
Retail Division
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250
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10,400
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Total
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650 computers
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16,000 checks
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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:
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Wholseale
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Retail
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Revenues
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$7,430,000
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$6,184,000
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|
Cost of goods sold
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4,123,000
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3,125,000
|
|
Operating expenses
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1,465,000
|
1,546,000
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Required - Prepare the divisional income statements for the two divisions.