Question

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	$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	982,000
Transportation Expense	497,600
Accounts Receivable Collection Expense	269,100
Warehouse Expense	3,515,000

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, $461,000; Summer Sports Division, $521,000.
2. Transportation expense—charged back to divisions at a charge rate of $16 per bill of lading: Winter Sports Division, 14,800 bills of lading; Summer Sports Division, 16,300 bills of lading.
3. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $9 per invoice: Winter Sports Division, 13,800 sales invoices; Summer Sports Division, 16,100 sales invoices.
4. Warehouse expense—charged back 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.

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	$	$

Provide supporting schedules for determining 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

Glades Sporting Goods Co.
Divisional Income Statements
For the Year Ended December 31, 20Y8
	Winter Sports Division	Summer Sports Division
Sales	36907500	40774000
Cost of goods sold	22144500	23550500
Gross profit	14763000	17223500
Divisional selling and administrative expenses:
Divisional selling expenses	6327000	5624000
Divisional administrative expenses	3690800	3620500
Total divisional selling and administrative expenses	10017800	9244500
Income from operations before service department charges	4745200	7979000
Service department charges:
Advertising expense	461000	521000
Transportation expense	236800	260800
Accounts receivable collection expense	124200	144900
Warehouse expense	1572500	1942500
Total service department charges	2394500	2869200
Income from operations	2350700	5109800
Glades Sporting Goods Co.
Service Department Charges
For the Year Ended December 31, 20Y8
	Winter Sports Division	Summer Sports Division	Total
Advertising expense	461000	521000	982000
Transportation rate per bill of lading	16	16
Number of bills of lading	14800	16300
Transportation expense	236800	260800	497600
Accounts receivable collection rate	9	9
Number of sales invoices	13800	16100
Accounts receivable collection expense	124200	144900	269100
Warehouse rate per sq. ft.	9.25	9.25
Number of square feet	170000	210000
Warehouse expense	1572500	1942500	3515000