Question

Profit Center Responsibility Reporting

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	$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	916,000
Transportation Expense	484,500
Accounts Receivable Collection Expense	217,000
Warehouse Expense	3,515,000

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, $430,000; Summer Sports Division, $486,000.
2. Transportation expense—allocated to divisions at a rate of $15 per bill of lading: Winter Sports Division, 15,400 bills of lading; Summer Sports Division, 16,900 bills of lading.
3. Accounts receivable collection expense—incurred at headquarters, allocated to divisions at a rate of $7 per invoice: Winter Sports Division, 14,300 sales invoices; Summer Sports Division, 16,700 sales invoices.
4. Warehouse expense—allocated 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.

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

	Winter sports division	Summer sports division	Total
Advertising expense	430000	486000	916000
Transportation rate per bill of lading	15400	16900
Number of bills of lading	15	15
Transportation expense	15400*15= 231000	16900*15= 253500	484500
Accounts receivable collection rate	14300	16700
Number of sales invoices	7	7
Accounts receivable collection expense	100100	116900	217000
Warehouse rate per sq. ft.	9.25	9.25
Number of square feet	170000	210000
Warehouse expense	1572500	1942500	3515000

working:

Total Square feet= 170000+210000=380000

warehouse rate per sq ft= 3515000/380000=$ 9.25 per SQ ft

Championship Sports Inc. Divisional Income Statements For the Year Ended December 31, 20Y9
	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)
Operating income before support department allocation	4745200	7979000
Support department allocations:
Advertising expense	430000	486000
Transportation expense	231000	253500
Accounts receivable collection expense	100100	116900
Warehouse expense	1572500	1942500
Total support department allocations	(2333600)	(2798900)
Operating income	2411600	5180100