Question

1. Profit Center Responsibility Reporting

   XSport 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, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:

   Sales—Winter Sports Division	$29,452,500
   Sales—Summer Sports Division	32,538,000
   Cost of Goods Sold—Winter Sports Division	17,671,500
   Cost of Goods Sold—Summer Sports Division	18,793,500
   Sales Expense—Winter Sports Division	5,049,000
   Sales Expense—Summer Sports Division	4,488,000
   Administrative Expense—Winter Sports Division	2,945,300
   Administrative Expense—Summer Sports Division	2,889,200
   Advertising Expense	961,000
   Transportation Expense	561,000
   Accounts Receivable Collection Expense	285,300
   Warehouse Expense	2,805,000

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

   1. Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $451,000; Summer Sports Division, $510,000.
   2. Transportation expense—charged back to divisions at a charge rate of $17 per bill of lading: Winter Sports Division, 15,700 bills of lading; Summer Sports Division, 17,300 bills of lading.
   3. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $9 per invoice: Winter Sports Division, 14,600 sales invoices; Summer Sports Division, 17,100 sales invoices.
   4. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 150,000 square feet; Summer Sports Division, 190,000 square feet.

   Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Do not round your interim calculations.

   XSport Sporting Goods Co.
   Divisional Income Statements
   For the Year Ended December 31, 20Y9
   	Winter Sports Division	Summer Sports Division
   Sales	$	$
   Cost of goods sold
   Gross profit	$	$
   Divisional selling and administrative expenses:
   Divisional selling expenses	$	$
   Divisional administrative expenses
   Total divisional selling and administrative expenses	$	$
   Income from operations before service department charges	$	$
   Service department charges:
   Advertising expense	$	$
   Transportation expense
   Accounts receivable collection expense
   Warehouse expense
   Total service department charges	$	$
   Income from operations	$	$

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

   XSport Sporting Goods Co.
   Service Department Charges
   For the Year Ended December 31, 20Y9
   	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	$	$	$

Answer 1

XSport Sporting Goods Co.
Divisional Income Statements
For the Year Ended December 31, 20Y9
	Winter Sports Division	Summer Sports Division
Sales	29452500	32538000
Cost of goods sold	17671500	18793500
Gross profit	11781000	13744500
Divisional selling and administrative expenses:
Divisional selling expenses	5049000	4488000
Divisional administrative expenses	2945300	2889200
Total divisional selling and administrative expenses	7994300	7377200
Income from operations before service department charges	3786700	6367300
Service department charges:
Advertising expense	451000	510000
Transportation expense	266900	294100
Accounts receivable collection expense	131400	153900
Warehouse expense	1237500	1567500
Total service department charges	2086800	2525500
Income from operations	1699900	3841800
XSport Sporting Goods Co.
Service Department Charges
For the Year Ended December 31, 20Y9
	Winter Sports Division	Summer Sports Division	Total
Advertising expense	451000	510000	961000
Transportation rate per bill of lading	17	17
Number of bills of lading	15700	17300
Transportation expense	266900	294100	561000
Accounts receivable collection rate	9	9
Number of sales invoices	14600	17100
Accounts receivable collection expense	131400	153900	285300
Warehouse rate per sq. ft.	8.25	8.25
Number of square feet	150000	190000
Warehouse expense	1237500	1567500	2805000