Question

Yozamba Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows:

Tech Support Department	$1,372,800
Purchasing Department	438,000
Other corporate administrative expenses	779,000
Total corporate expense	$2,589,800

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 Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows:

	Tech Support		Purchasing
Consumer Division	480	computers	5,100	purchase orders
Commercial Division	300		9,500
Total	780	computers	14,600	purchase orders

The service department charges of the Tech Support Department and the Purchasing 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:

	Consumer		Commercial
Revenues	$11,734,400		$9,421,300
Cost of goods sold	6,519,100		4,757,300
Operating expenses	2,301,700		2,355,100

Prepare the divisional income statements for the two divisions. Do not round your interim calculations.

Yozamba Technology
Divisional Income Statements
For the Year Ended December 31, 20Y7
		Consumer Division		Commercial Division
		$		$
		$		$
Income from operations before service department charges		$		$
Service department charges:
		$		$
Total service department charges		$		$
		$		$

Answer 1

• All working forms part of the answer
• Working

Working		Tech Support	Purchasing Department
A	Total Overhead costs	$    1,372,800.00	$       438,000.00
	Allocation base	Computes	Purchase Orders
B	Total Allocation base	780	14600
C = A/B	Overhead per allocation base	$             1,760.00	$                  30.00

• Requirement

Yozamba Technology
Divisional Income Statements
For the Year Ended December 31, 20Y7
		Consumer Division		Commercial Division
Revenues		$11,734,400.00		$9,421,300.00
Cost of Goods Sold		$ 6,519,100.00		$4,757,300.00
Gross Profits		$ 5,215,300.00		$4,664,000.00
Less: Operating Expenses		$ 2,301,700.00		$2,355,100.00
Income from operations before service department charges		$ 2,913,600.00		$2,308,900.00
Service department charges:
Tech Support Department	[480 x $1760]	$     844,800.00	[300 x $1760]	$   528,000.00
Purchasing Department	[5100 x $30]	$     153,000.00	[9500 x $30]	$   285,000.00
Total service department charges		$     997,800.00		$   813,000.00
Income from Division		$ 1,915,800.00		$1,495,900.00