Question

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	$12,600,000
Sales—Summer Sports Division	16,300,000
Cost of Goods Sold—Winter Sports Division	7,560,000
Cost of Goods Sold—Summer Sports Division	9,454,000
Sales Expense—Winter Sports Division	2,016,000
Sales Expense—Summer Sports Division	2,282,000
Administrative Expense—Winter Sports Division	1,260,000
Administrative Expense—Summer Sports Division	1,450,700
Advertising Expense	578,000
Transportation Expense	265,660
Accounts Receivable Collection Expense	174,000
Warehouse Expense	1,540,000

The bases to be used in allocating expenses, together with other essential information, are as follows:

Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $252,000; Summer Sports Division, $326,000.

Transportation expense—charged back to divisions at a charge rate of $7.40 per bill of lading: Winter Sports Division, 17,200 bills of lading; Summer Sports Division, 18,700 bills of lading.

Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $6.00 per invoice: Winter Sports Division, 11,500 sales invoices; Summer Sports Division, 17,500 sales invoices.

Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 102,000 square feet; Summer Sports Division, 118,000 square feet.

Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Round your interim calculations to two decimal places, if required.

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 expenses	$	$
Divisional administrative expenses
Operating expenses	$	$
Income from operations before service department charges	$	$
Less service department charges:
Advertising expense	$	$
Transportation expense
Accounts receivable collection expense
Warehouse expense
Total	$	$
Income from operations	$	$

Provide supporting calculations for service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.

Glades Sporting Goods Co.
Supporting Calculations
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	$	$	$

Check My Work3 more Check My Work uses remaining.

Answer 1

DIVISIONAL INCOME STATEMENT
	Winter sports division	Summer Sports division
Sales	12,600,000	16,300,000
Cost of goods sold	7560000	9454000
Gross profit	5,040,000	6,846,000
Divisional selling expenses	2016000	2282000
Divisional administrative	1,260,000	1,450,700
Operating expenses	3276000	3732700
Income from operations before service department charges	1,764,000	3,113,300
Less service department
Advertising	252000	326000
Transportation	127280	138380
Accounts receivbales collection	69000	105000
Warehouse expenses	714000	826000
Total	1162280	1395380
Income from operations	601,720	1,717,920

Workings

Advertising expenses	252000	326000	578000
Transportation rate per bill of lading	7.4	7.4	7.4
Number of bills of lading	17200	18700	35900
Transportation expenses	127280	138380	265660
Accounts receivables collection rate	6	6	6
Number of sales Invoices	11500	17500	29000
Accounts receivables collection expenses	69000	105000	174000
Warehouse rate per sq.ft	7	7	7
Number of square feet	102000	118000	220000
Warehouse expenses	714000	826000	1540000

In respect of warehouse, rate per sq.ft was computed as 1540000 / 220000 = 7 per sq.ft