FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Power Sports Company has two divisions, Wholesale and Retail, and two corporate service departments, Tech Support and Accounts Payable. The corporate expenses for the year ended December 31, 20Y7, are as follows:
| Tech Support Department | $1,146,600 |
| Accounts Payable Department | 522,000 |
| Other corporate administrative expenses | 717,000 |
| Total corporate expense | $2,385,600 |
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 Accounts Payable Department charges divisions for services, based on the number of checks issued. The usage of service by the two divisions is as follows:
| Tech Support | Accounts Payable | |||
| Wholesale Division | 480 | computers | 6,100 | checks |
| Retail Division | 300 | 11,300 | ||
| Total | 780 | computers | 17,400 | checks |
The service department charges of the Tech Support Department and the Accounts Payable Department are considered controllable by the divisions. Corporate administrative expenses are not considered controllable by the divisions. The revenues, cost of goods sold, and operating expenses for the two divisions are as follows:
| Wholesale | Retail | |||
| Revenues | $10,450,100 | $9,038,900 | ||
| Cost of goods sold | 5,805,600 | 4,564,200 | ||
| Operating expenses | 2,049,800 | 2,259,500 |
Prepare the divisional income statements for the two divisions.
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