The Corporation has two separate divisions that operate as profit centers. The f
ID: 2481784 • Letter: T
Question
The Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year:
Sales (net), Salary expense ,Cost of goods sold
White Division $250,525 27,500 145,350
Grey Division $450,375 52,350 157,675
The White Division occupies 25,000 square feet in the plant. The Grey Division occupies 45,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $50,000.
23. Gross profit for the White and Grey Divisions is:
White A. $ 77,675 B. $172,000
C. $59,818 D. $ 105,175 E. $ 52,675
Grey $240,350 $352,000 $208,207 $292,700 $215,350
24. Grey Division's departmental income is: (round to whole dollar) A. $208,207
B. $211,000
C. $240,350
D. $292,700 E. $215,350
Explanation / Answer
Answer:23
Gross profit = Sales - COGS
Calculation of Gross profit for each division:
White division = 250525 - 145350 = 105175
Grey division = 450375 - 157675 = 292700
Answer:24
Departmental income = Gross profit - Salary expense - Rent expense
Rent expense for Grey division = [45000/(25000+45000)] *50000
= (45000/70000)*50000 = 0.64*50000 = 32000
Departmental income = 292700 - 52350 - 32000 = $208350
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