Exercise 14-22 (Algo) Compute Divisional Income (LO 14-1) Arlington Clothing, Inc., shows the following information for its two divisions for year 1. Lake Region Coastal Region Sales revenue $ 4,110,000 $ 13,020,000 Cost of sales 2,666,300 6,510,000 Allocated corporate overhead 246,600 781,200 Other general and administration 548,900 3,750,000 Required: a. Compute divisional operating income for the two divisions. Ignore taxes.

Exercise 14-22 (Algo) Compute Divisional Income (LO 14-1) Arlington Clothing, Inc., shows the following information for its two divisions for year 1. Lake Region Coastal Region Sales revenue $ 4,110,000 $ 13,020,000 Cost of sales 2,666,300 6,510,000 Allocated corporate overhead 246,600 781,200 Other general and administration 548,900 3,750,000 Required: a. Compute divisional operating income for the two divisions. Ignore taxes.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.5.1P

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Exercise 14-22 (Algo) Compute Divisional Income (LO 14-1)

Arlington Clothing, Inc., shows the following information for its two divisions for year 1.

	Lake Region	Coastal Region
Sales revenue	$	4,110,000	$	13,020,000
Cost of sales		2,666,300		6,510,000
Allocated corporate overhead		246,600		781,200
Other general and administration		548,900		3,750,000

Required:

a. Compute divisional operating income for the two divisions. Ignore taxes.

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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