Question

1. Profit Center Responsibility Reporting

   Glades 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, 20Y8, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:

   Sales—Winter Sports Division	$26,775,000
   Sales—Summer Sports Division	29,580,000
   Cost of Goods Sold—Winter Sports Division	16,065,000
   Cost of Goods Sold—Summer Sports Division	17,085,000
   Sales Expense—Winter Sports Division	4,590,000
   Sales Expense—Summer Sports Division	4,080,000
   Administrative Expense—Winter Sports Division	2,677,500
   Administrative Expense—Summer Sports Division	2,626,500
   Advertising Expense	967,000
   Transportation Expense	457,500
   Accounts Receivable Collection Expense	234,400
   Warehouse Expense	2,550,000

   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, $454,000; Summer Sports Division, $513,000.
   2. Transportation expense—charged back to divisions at a charge rate of $15 per bill of lading: Winter Sports Division, 14,500 bills of lading; Summer Sports Division, 16,000 bills of lading.
   3. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $8 per invoice: Winter Sports Division, 13,500 sales invoices; Summer Sports Division, 15,800 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.

   Glades Sporting Goods Co.
   Divisional Income Statements
   For the Year Ended December 31, 20Y8
   	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	$	$

   Feedback

   Provide supporting schedules for determining The costs of services provided by an internal service department and transferred to a responsibility center.service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.

   Glades Sporting Goods Co.
   Service Department Charges
   For the Year Ended December 31, 20Y8
   	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