Question

Divisional Income Statements with Service Department Charges Yozamba Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 2017, are as follows: Tech Support Department $1,392,000 Purchasing Department 304,000 Other corporate administrative expenses 729,000 Total corporate expense $2,425,000 The other corporate administrative expenses include officers' salaries and other expenses required by the corporation. The Tech Support Department charges the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department charges divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows: Tech Support Purchasing Consumer Division 490 computers 5,300 purchase orders Commercial Division 310 9,900 Total 800 computers 15,200 purchase orders The service department charges of the Tech Support Department and the Purchasing Department are considered controllable by the divisions. Corporate administrative expenses are not considered controllable by the divisions. The revenues, cost of goods sold, and operating expenses for the two divisions are as follows: Consumer Commercial Revenues $11,273,400 $8,545,200 Cost of goods sold 6,263,000 4,314,900 Operating expenses 2,211,300 2,136,100 Prepare the divisional income statements for the two divisions. Do not round your interim calculations. Yozamba Technology Divisional Income Statements For the Year Ended December 31, 2017 Consumer Division Commercial Division Revenues Cost of goods sold Gross profit Operating expenses Income from operations before service department charges

Answer 1

Answer:

Yozamba Technology

Divisional Income Statements

for the year ended December 31, 20Y7

	Consumer Division	Commercial Division
Revenues	11,273,400	8,545,200
Cost of Goods sold	6,263,000	4,314,900
Gross Profit	5,010,400	4,230,300
Operating Expenses	2,211,300	2,136,100
Income from operations before service department charges	2,799,100	2,094,200
Service Department charges:
Tech support department	852,600	539,400
Purchasing department	106,000	198,000
Total Service Department charges	958,600	737,400
Income from operations	1,840,500	1,356,800

Calculation:

Tech Support Department charges per computer = $1,392,000/ 800 = $1,740

Purchasing department charges per Purchase order = $304,000/15,200= $20

Consumer Division:

Tech Support Department charges = $1,740 * 490 = $852,600

Purchasing Department charges = $20 * 5,300 = $106,000

Commercial Division:

Tech Support Department charges= $1,740 * 310 = $539,400

Purchasing Department charges = $20 * 9,900 = $198,000