Divisional Income Statements with Service Department Charges Yozamba Technology
ID: 2531353 • Letter: D
Question
Divisional Income Statements with Service Department Charges
Yozamba Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows:
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:
The service department charges of the Tech Support Department and the Purchasing 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:
Prepare the divisional income statements for the two divisions. Do not round your interim calculations.
Tech Support Department $1,352,000 Purchasing Department 219,000 Other corporate administrative expenses 676,000 Total corporate expense $2,247,000Explanation / Answer
Solution:
Determination of allocation rate and cost allocation of service department to divisions Service Department Total Expenses Allocation Base Quantity of Allocation Base Alocation rate Consumer division Commercial division Usage Allocated Costs Usage Allocated Costs Tech Support Department $1,352,000.00 Computers 800 $1,690.00 490 $828,100.00 310 $523,900.00 Purchasing Department $219,000.00 Nos of orders 14600 $15.00 5100 $76,500.00 9500 $142,500.00 Total $1,571,000.00 $904,600.00 $666,400.00