Question

Championship Sports Inc. 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	$36,907,500
Sales—Summer Sports Division	40,774,000
Cost of Goods Sold—Winter Sports Division	22,144,500
Cost of Goods Sold—Summer Sports Division	23,550,500
Sales Expense—Winter Sports Division	6,327,000
Sales Expense—Summer Sports Division	5,624,000
Administrative Expense—Winter Sports Division	3,690,800
Administrative Expense—Summer Sports Division	3,620,500
Advertising Expense	922,000
Transportation Expense	473,600
Accounts Receivable Collection Expense	198,800
Warehouse Expense	3,515,000

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

1. Advertising expense—incurred at headquarters, allocated to divisions on the basis of usage: Winter Sports Division, $433,000; Summer Sports Division, $489,000.
2. Transportation expense—allocated to divisions at a rate of $16 per bill of lading: Winter Sports Division, 14,100 bills of lading; Summer Sports Division, 15,500 bills of lading.
3. Accounts receivable collection expense—incurred at headquarters, allocated to divisions at a rate of $7 per invoice: Winter Sports Division, 13,100 sales invoices; Summer Sports Division, 15,300 sales invoices.
4. Warehouse expense—allocated to divisions on the basis of floor space used in storing division products: Winter Sports Division, 170,000 square feet; Summer Sports Division, 210,000 square feet.

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

Championship Sports Inc.
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	$	$
Operating income before support department allocations	$	$
Support department allocations:
Advertising expense	$	$
Transportation expense
Accounts receivable collection expense
Warehouse expense
Total support department allocations	$	$
Operating income	$	$

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

Championship Sports Inc.
Support Department Allocations
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

Preparation of a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division:

Championship Sports Inc.

Divisional Income Statements

For the Year Ended December 31, 20Y9

particular	Winter Sports Division ( amounts in $ )	Summer Sports Division ( amounts in $ )
Sales (a)	36907500	40774000
cost of goods sold (b)	22144500	23550500
gross profit(c=a-b)	14763000	17223500
Divisional selling and administrative expenses:
Divisional selling exp.(d)	6327000	5624000
Divisional administrative expenses(e)	3690800	3620500
Total divisional selling and administrative expenses (f=d+e)	10017800	9244500
Operating income before support department allocations (g=c-f)	4745200	7979000
Support department allocations:
advertisement exp.(h)	433000	489000
transportation exp.(i)	225600	248000
account receivable collection exp. (j)	91700	107100
warehouse exp. (k)	1572500	1942500
Total support department allocations (l=h+i+j+k)	2322800	2786600
operating income (m=g-l)	2422400	518660

statement showing supporting schedules for determining support department allocations

Championship Sports Inc.

Support Department Allocations

For the Year Ended December 31, 20Y9

particular	Winter Sports Division (amounts in $)	Summer Sports Division (amounts in $)	total (amounts in $)
advertisement exp	433000	489000	922000
Transportation rate per bill of lading ($)	16	16
Number of bills of lading	14100	15500
transportation exp	14100x16=225600	15500x16=248000	473600
Accounts receivable collection rate ($)	7	7
Number of sales invoices	13100	15300	28400
account receivable collection exp.	13100x7=91700	15300x7=107100	198800
Warehouse rate per sq. ft ($).	3515000/380000=9.25	3515000/380000=9.25
Number of square feet	170000	210000	380000
warehouse exp.($)	170000x9.25=1572500	210000x9.25=1942500	3515000

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