Sierra Sporting Goods Co. operates two divisions—the Camping Equipment Division and the Ski Equipment Division. The following income and expense accounts were provided from the trial balance as of June 30, 2006, the end of the current fiscal year, after all adjustments, including those for inventories, were recorded and posted:
Sales—Camping Equipment Division . . . . . . . . . . . . . . . . . . . . . . . $380,000
Sales—Ski Equipment Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575,000
Cost of Goods Sold—Camping Equipment Division . . . . . . . . . . . 205,000
Cost of Goods Sold—Ski Equipment Division . . . . . . . . . . . . . . . . 275,000
Sales Expense—Camping Equipment Division . . . . . . . . . . . . . . . . 60,000
Sales Expense—Ski Equipment Division . . . . . . . . . . . . . . . . . . . . . 82,000
Administrative Expense—Camping Equipment Division . . . . . . . . . 38,800
Administrative Expense—Ski Equipment Division . . . . . . . . . . . . . . 51,200
Advertising Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,800
Transportation Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,140
Accounts Receivable Collection Expense . . . . . . . . . . . . . . . . . . . . . 11,620
Warehouse Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000
The bases to be used in allocating expenses, together with other essential information, are as follows:
a. Advertising expense—incurred at headquarters, charged back to divisions on the basis of usage: Camping Equipment Division, $11,200; Ski Equipment Division, $14,600.
b. Transportation expense—charged back to divisions at a transfer price of $3.80 per bill of lading: Camping Equipment Division, 2,400 bills of lading; Ski Equipment Division, 2,900 bills of lading.
c. Accounts receivable collection expense—incurred at headquarters, charged back to divisions at a transfer price of $2.80 per invoice: Camping Equipment Division, 1,800 sales invoices; Ski Equipment Division, 2,350 sales invoices.
d. Warehouse expense—charged back to divisions on the basis of floor space used in storing division products: Camping Equipment Division, 10,000 square feet; Ski Equipment Division, 5,000 square feet.
Prepare a divisional income statement with two column headings: Camping Equipment Division and Ski Equipment Division. Provide supporting schedules for determining service department charges.