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	$27,930,000
Sales—Summer Sports Division	30,856,000
Cost of Goods Sold—Winter Sports Division	16,758,000
Cost of Goods Sold—Summer Sports Division	17,822,000
Sales Expense—Winter Sports Division	4,788,000
Sales Expense—Summer Sports Division	4,256,000
Administrative Expense—Winter Sports Division	2,793,000
Administrative Expense—Summer Sports Division	2,739,800
Advertising Expense	1,003,000
Transportation Expense	510,400
Accounts Receivable Collection Expense	214,200
Warehouse Expense	2,660,000

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, $471,000; Summer Sports Division, $532,000.
2. Transportation expense—allocated to divisions at a rate of $16 per bill of lading: Winter Sports Division, 15,200 bills of lading; Summer Sports Division, 16,700 bills of lading.
3. Accounts receivable collection expense—incurred at headquarters, allocated to divisions at a rate of $7 per invoice: Winter Sports Division, 14,100 sales invoices; Summer Sports Division, 16,500 sales invoices.
4. Warehouse expense—allocated to divisions on the basis of floor space used in storing division products: Winter Sports Division, 120,000 square feet; Summer Sports Division, 160,000 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

Answer:-

		Winter Sports		Summer Sports
Particulars		Division		Division
Sales		27,930,000		30,856,000
Cost of Goods sold		16,758,000		17,822,000
Gross Profit		11,172,000		13,034,000
Divisional selling and administrative expenses:
Divisional selling expenses		4,788,000		4,256,000
Divisional administrative expenses		2,793,000		2,739,800
Total divisional selling and administrative expenses		7,581,000		6,995,800
Operating income before support department allocations		3,591,000		6,038,200
Support department allocations:
Advertising expense		471,000		532,000
Transportation expense		243,200		267,200
Accounts receivable collection expense		98,700		115,500
Warehouse expense		1,140,000		1,520,000
Total support department allocations		1,952,900		2,434,700
Operating income		1,638,100		3,603,500

Support Department Allocations
		Winter Sports		Summer Sports
		Division		Division		Total
Advertising expense	471,000		532,000		1,003,000
Transportation rate per bill of lading	16		16
Number of bills of lading	15,200		16,700
Transportation expense	243,200		267,200		510,400
Accounts receivable collection rate	7		7
Number of sales invoices	14,100		16,500
Accounts receivable collection expense	98,700		115,500		214,200
Warehouse rate per sq. ft.	9.5		9.5
Number of square feet	120,000		160,000
Warehouse expense	1,140,000		1,520,000		2,660,000

Workings:-

Transportation expense(for winter sports) = 15200 * 16 = 243,200

Transportation expense(for summer sports) = 16,700*16 = 267,200

Accounts receivable collection expense (for winter sports) = 14,100*7 = 98,700

Accounts receivable collection expense (for summer sports) = 16,500*7= 115,500

Warehouse expense (for winter sports) = 2660000*120000/280000 = 1,140,000

Warehouse expense (for summer sports) = 2660000*160000/280000 = 1,520,000