eBook Divisional Income Statements with Service Department Charges Yozamba Techn
ID: 2555457 • Letter: E
Question
eBook Divisional Income Statements with Service Department Charges Yozamba Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Show Me HowCalculator corporate expenses for the year ended December 31, 20Y7, are as follows: Purchasing. The Tech Support Department $516,000 89,600 560,000 $1,165,600 Purchasing Department Other corporate administrative expenses Total corporate expense 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: Purchasing Tech Support 375 computers 225 600 computers 1,960 purchase orders 3,640 5,600 purchase orders Consumer Division Total The service department charges of the Tech Support Department and the Purchasing Department are considered Corporate administrative expenses are not considered controllable by the divisions. The revenues, cost of the two divisions are as folows: controliable by the divisions goods sold, and operating expenses for 3:44 PM 4 3/28/2018 0Explanation / Answer
OH allocation of Tech Support department: Total Overheads 516000 Total Number of computers 600 Cost per Computer 860 Consumer division(375 computers@860) 322500 Commercial Division(225 computers @860) 193500 OH Allocation of Purchasing Department: Total Overheads 89600 Total Number of orders 5600 Cost per order 16 Consumer Division (1960 orders @ 16) 31360 Commercial Divison (3640 orders @16) 58240 DIVISIONAL INCOME STATEMEENT: CONSUMER COMMERCIAL Revenues 7430000 6184000 Less: Cost of goods sold 4123000 3125000 Gross margin 3307000 3059000 Less: Operating expense 1465000 1546000 Net income before service deptt expense 1842000 1513000 Service department charges: Tech support deptt. 322500 193500 Purchasing deptt 31360 58240 Net Income 1488140 1261260
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