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Divisional Income Statements with Service Department Charges Yozamba Technology has two divisions, Consumer and Commercial, and...

Divisional Income Statements with Service Department Charges

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 $1,216,000
Purchasing Department 442,500
Other corporate administrative expenses 713,000
Total corporate expense $2,371,500

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 490 computers 6,200 purchase orders
Commercial Division 310 11,500
    Total 800 computers 17,700 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 $10,581,800 $8,792,100
Cost of goods sold 5,878,800 4,439,600
Operating expenses 2,075,600 2,197,800

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 $ $
$ $

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Expert Solution

Divisional Income Statements
For the Year Ended December 31, 20Y7 Amount in $
Consumer Division Commercial Division
Revenues 10,581,800        8,792,100
Less: Cost of goods sold     5,878,800        4,439,600
Less: Operating expenses     2,075,600        2,197,800
Income from operations before service department charges     2,627,400        2,154,700
Less :Service department charges:
Tech Support Department       744,800         471,200
Purchasing Department       155,000         287,500
Total service department charges       899,800         758,700
Divisional Income     1,727,600        1,396,000
Working:-Allocation
Tech Support Department
Consumer division $ 744,800 (1,216,000 x 490 ) / 800
Commercial division $ 471,200 (1,216,000 x 310 ) / 800
Purchasing Department
Consumer division $ 155,000 (442,500 x 6,200) / 17,700
Commercial division $ 287,500 (442,500 x 11,500 ) / 17,700

ekkarill92 answered 2 years ago
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