Big Bear Athletic Equipment Co. operates two division - the WinterSports Divisio
ID: 2433927 • Letter: B
Question
Big Bear Athletic Equipment Co. operates two division - the WinterSports Division and the Summer Sports Division. The followingincome and expense accounts were provided from the trial balance asof June 30, 2008, the end of the current fiscal year, after alladjustments, including those for inventories, were recorded andposted:Sales - Winter Sports (WS) Division...$950,000
Sales - Summer Sports (SS) Division...$1,437,500
COGS - (WS) Division...$512,500
COGS - (SS) Division...$687,500
Sales Exp - (WS) Division...$150,000
Sales Exp - (SS) Division...$205,000
Admini Exp - (WS) Division...$97,000
Admini Exp - (SS) Division...$128,000
Advertising Exp...$64,500
Transportation Exp...$100,700
A/R Collection Exp...$58,100
Warehouse Exp...$120,000
The bases to be used in allocating expenses, together with otheressential information, are as follows:
a. Advertising Exp - incurred at headquarters, charged back todivisions on the basis of usage: (WS) Division, $28,000; (SS)Division, $36,500.
b. Transportation Exp - charged back to divisions at a transferprice of $7.60 per bill of lading: (WS) Division, 6,000 bills oflading; (SS) Division, 7,250 bills of lading.
c. A/R Collection Exp - incurred at headquarters, charged back todivisions at a transfer price of $5.60 per invoice; (WS) Division,4,500 sales invoices; (SS) Division, 5,875 sales invoices.
d. Warehouse Exp - charged back to divisions on the basis of floorspace used in storing division products: (WS) Division, 25,000 sqft; (SS) Division, 12,500 sq ft.
Prepare a division income statement with two column headings: (WS)Division and (SS) Division. Provide supporting schedules fordetermining service department charges.
Explanation / Answer
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