Perth Corporation has two operating divisions, a casino and a hotel. The two divisions meet the...

Perth Corporation has two operating divisions, a casino and a hotel. The two divisions meet the requirements for segment disclosures. Before transactions between the two divisions are considered, revenues and costs are as follows:

	Casino		Hotel
Revenues	$	35,000,000	$	21,000,000
Costs		16,000,000		13,000,000

The casino and the hotel have a joint marketing arrangement by which the hotel gives coupons redeemable at casino slot machines and the casino gives discount coupons good for stays at the hotel. The value of the coupons for the slot machines redeemed during the past year totaled $5,000,000. The discount coupons redeemed at the hotel totaled $1,000,000. As of the end of the year, all coupons for the current year expired.

Required:

What are the operating profits for each division considering the effects of the costs arising from the joint marketing agreement? (Enter your answers in thousands.)

Operating Profits

casino

hotel

Solutions

Expert Solution

	($000)	($000)
Particulars	Casino	Hotel
Revenue
Outside revenue	35,000	21,000
Transfer price	5,000	1,000
Total revenue	40,000	22,000
Less:
Outside costs	16,000	13,000
Transfer	1,000	5,000
Total costs	17,000	18,000
Operating profit before tax	23,000	4,000

ekkarill92 answered 1 year ago

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