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, 2049, the end of the fiscal year after all adjustments including those for inventories, were recorded and posted Sales-Winter Sports Division Sales-Summer Sports Division Cost of Goods Sold-Winter Sports Division Cost of Goods Sold-Summer Sports Division Sales Expense-Winter Sports Division $8,800,000 15,100,000 5,000,000 8,000,000 650,000 Sales Expense-Summer Sports Division Administrative Expense-Winter Sports Division Administrative Expense-Summer Sports Division 1,100,000 850,000 1,340,000 Advertising Expense 1,065,000 Transportation Expense 312,000 Accounts Receivable Collection Expense 66,000 Warehouse Expense 858,000 The bases to be used in allocating expenses, together with other information, are as follows: a Advertising expense-incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $313,000: Summer Sports Division $752,000. Transportation expense-charged back to divisions at a charge rate of $6.00 per bill of lading: Winter Sports Division, 17,000 bills of lading Summer Sports Division, 35,000 bills of lading. Accounts receivable collection expense-incurred at headquarters, charged back to divisions at a charge rate of $1.00 per invoice Winter Sports Division 25000

Answer 1

Championship Sports Inc
Divisional Income Statements
For the Year Ended December 31, 20Y9
	Winter Sports Division	Summer Sports Division
Sales	8800000	15100000
Cost of goods sold	5000000	8000000
Gross profit	3800000	7100000
Divisional selling and administrative expenses:
Divisional selling expenses	650000	1100000
Divisional administrative expenses	850000	1340000
Total divisional selling and administrative expenses	1500000	2440000
Income from operations before service department charges	2300000	4660000
Service department charges:
Advertising expense	313000	752000
Transportation expense	102000	210000
Accounts receivable collection expense	25000	41000
Warehouse expense	300000	558000
Total service department charges	740000	1561000
Income from operations	1560000	3099000
Championship Sports Inc
Service Department Allocations
For the Year Ended December 31, 20Y9
	Winter Sports Division	Summer Sports Division	Total
Advertising expense	313000	752000	1065000
Transportation rate per bill of lading	6.00	6.00
Number of bills of lading	17000	35000
Transportation expense	102000	210000	312000
Accounts receivable collection rate	1.00	1.00
Number of sales invoices	25000	41000
Accounts receivable collection expense	25000	41000	66000
Warehouse rate per sq. ft.	6.00	6.00
Number of square feet	50000	93000
Warehouse expense	300000	558000	858000