Profit Center Responsibility Reporting XSport Sporting Goods Co. operates two di
ID: 2556659 • Letter: P
Question
Profit Center Responsibility Reporting
XSport Sporting Goods Co. 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, 20Y9, the end of the fiscal year, after all adjustments, including those for inventories, were recorded and posted:
The bases to be used in allocating expenses, together with other essential information, are as follows:
Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Winter Sports Division, $216,900; Summer Sports Division, $265,100.
Transportation expense—charged back to divisions at a charge rate of $8.00 per bill of lading: Winter Sports Division, 14,400 bills of lading; Summer Sports Division, 15,600 bills of lading.
Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a charge rate of $5.00 per invoice: Winter Sports Division, 9,640 sales invoices; Summer Sports Division, 14,460 sales invoices.
Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Winter Sports Division, 94,000 square feet; Summer Sports Division, 106,000 square feet.
Prepare a divisional income statement with two column headings: Winter Sports Division and Summer Sports Division. Round your interim calculations to two decimal places, if required.
Feedback
For each division: Sales minus cost of goods sold equals gross profit minus divisional selling and administrative expenses equals income from operations before service department charges. Service department charges are subtracted from income from operations before service department charges.
Learning Objective 3.
Provide supporting calculations for service department charges. If required, round per unit amounts to two decimal places and final answers to the nearest dollar.
Sales—Winter Sports Division $10,500,000 Sales—Summer Sports Division 13,600,000 Cost of Goods Sold—Winter Sports Division 6,300,000 Cost of Goods Sold—Summer Sports Division 7,888,000 Sales Expense—Winter Sports Division 1,680,000 Sales Expense—Summer Sports Division 1,904,000 Administrative Expense—Winter Sports Division 1,050,000 Administrative Expense—Summer Sports Division 1,210,400 Advertising Expense 482,000 Transportation Expense 240,000 Accounts Receivable Collection Expense 120,500 Warehouse Expense 1,200,000Explanation / Answer
XSport Sporting Goods Co. Service Department Charges For the Year Ended December 31, 20Y9 Winter Sports Division Summer Sports Division Total Working Advertising expense 216900 265100 482000 Given in Que Transportation rate per bill of lading 8 8 8 A Number of bills of lading 14400 15600 30000 B Transportation expense 115200 124800 240000 A*B Accounts receivable collection rate 5 5 5 C Number of sales invoices 9640 14460 24100 D Accounts receivable collection expense 48200 72300 120500 C*D Warehouse rate per sq. ft. 6 6 6 E/F Number of square feet 94000 106000 200000 E Warehouse expense 564000 636000 1200000 F XSport Sporting Goods Co. Divisional Income Statements For the Year Ended December 31, 20Y9 Winter Sports Division Summer Sports Division Sales 10500000 13600000 Cost of goods sold 6300000 7880000 Gross profit 4200000 5720000 Sales-COGS Divisional selling and administrative expenses: Divisional selling expenses 1680000 1904000 Divisional administrative expenses 1050000 1210400 Total divisional selling and administrative expenses 2730000 3114400 Selling+Admin Income from operations before service department charges 1470000 2605600 Gross Profit-Total Divisional Service department charges: Advertising expense 216900 265100 Transportation expense 115200 124800 Accounts receivable collection expense 48200 72300 Warehouse expense 564000 636000 Total service department charges 944300 1098200 Income from operations 525700 1507400
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