Question

Profit Center Responsibility Reporting XSport 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, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted: Sales-Winter Sports Division $26,880,000 Sales-Summer Sports Division 29,696,000 Cost of Goods Sold-Winter Sports Division 16,128,000 Cost of Goods Sold-Summer Sports Division 17,152,000 Sales Expense-Winter Sports Division 4,608,000 Sales Expense-Summer Sports Division 4,096,000 Administrative Expense-Winter Sports Division 2,688,000 Administrative Expense-Summer Sports Division 2,636,800 Advertising Expense 895,000 Transportation Expense 492,000 Accounts Receivable Collection Expense 283,500 Warehouse Expense 2,560,000 The bases to be used in allocating expenses, together with other essential information, are as follows: a. Advertising expense-incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $420,000; Summer Sports Division, $475,000. b. Transportation expense-charged back to divisions at a charge rate of $15 per bill of lading: Winter Sports Division, 15,600 bills of lading; Summer Sports Division, 17,200 bills of lading. c. Accounts receivable collection expense-incurred at headquarters, charged back to divisions at a charge rate of $9 per invoice: Winter Sports Division, 14,500 sales invoices; Summer Sports Division, 17,000 sales invoices. d. Warehouse expense-charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 140,000 square feet; Summer Sports Division, 180,000 square feet. Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Do not round your interim calculations.

Answer 1

Summer Sports Division $2,96,96,000 $1,71,52,000 $1,25,44,000 Xsport Sporting Good Company Divisional Income Statement For the Year Ended 31st December 2049 Particulars Winter Sports Division Sales (A) $2,68,80,000 Cost of Good Sold (B) $1,61,28,000 Gross Profit (C) = (A)-(B) $1,07,52,000 Divisional Selling and Administrative Expenses: Divisional Selling Expense $46,08,000 Divisional Administrative Expense $26,88,000 Total Divisional Selling and Administrative Expenses (D) $72,96,000 Income from operation before service department charges [(E) = (C)-(D)] $34,56,000 Service Department Charges: Advertising Expense $4,20,000 Transportation Expense $2,34,000 Accounts Receivable collection expense $1,30,500 Warehouse Expense $11,20,000 Total Service Department Charges (F) $19,04,500 Income From Operations [(E) - (F) $15,51,500 $40,96,000 $26,36,800 $67,32,800 $58,11,200 $4,75,000 $2,58,000 $1,53,000 $14,40,000 $23,26,000 $34,85,200 Total $8,95,000 $15 Xsport Sporting Good Company Service Department Charges For the Year Ended 31st December 2049 Particulars | Winter Sports Division Advertising Expense $4,20,000 Transportation rate per bill of lading (a) Number of Bills of lading (b) 15600 Transporation Expense [(a) (b)] $2,34,000 Accounts Receivable collection rate (c) $9 Number of sales invoices (d) 14,500 Accounts Receivable collection expense [(c ) x (d)] $1,30,500 Warehouse rate per square feet ($2560000/(140000+180000)] (e) $8.00 Number of square feet (t) 1,40,000 Warehouse Expense [(e) x (f)] 11,20,000 $4,92,000 Summer Sports Division $4,75,000 $15 17200 $2,58,000 $9 17,000 $1,53,000 $8.00 1,80,000 14,40,000 $2,83,500 $25,60,000