Divisional Income Statements with Service Department Charges Ryan Snow Sports Co

Question

Divisional Income Statements with Service Department Charges Ryan Snow 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, 2014, are as follows: Tech Support Department Accounts Payable 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 Accounts Payable Department charges divisions for services, based on the number of checks issued for each department. The usage of service by the two divisions is as follows: $ 1,018,400 249,000 545,000 $1,812,400 Tech Support 410 computers 260 670 computers Accounts Payable Wholesale Division 5,800 checks Retail Division 10,800 Total 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: 16,600 checks Wholesale Retail Revenues Cost of goods sold Operating expenses $8,352,200 4,640,100 1,638,300 $6,456,700 3,260,300 1,614,000

Explanation / Answer

Ryan Snow Sports Company Divisional Income Statement For the year ended December 31, 2014 Wholesale Division Retail Division $ $ Revenue    8,352,200          6,456,700 Less:- Cost of Goods sold    4,640,100          3,260,300 Less:- Operating Exp    1,638,300          1,614,000 Gross Profit    2,073,800          1,582,400 Less:- Tech Support Exp        623,200              395,200 (410 : 260) Less:- Account payable Exp          87,000              162,000 (5800:10800) Less:- other corporate Exp        307,379              237,621 (in sales ratio 8352200 :6456700) Net Income    1,056,221              787,579

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