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Divisional Income Statements with Service Department Allocations Grael Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The
Divisional Income Statements with Service Department Allocations Grael Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate costs for the year ended December 31, 2017, are as follows: Tech Support Department Purchasing Department Other corporate administrative costs $336,000 67,500 448,000 $851,500 Total corporate costs The other corporate administrative costs include officers' salaries and miscellaneous smaller costs required by the corporation. The Tech Support Department allocates the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department allocates divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows: Consumer Division Tech Support Purchasing 300 computers 1,800 purchase orders 180 2,700 480 computers 4,500 purchase orders Commercial Division Total The service department allocations of the Tech Support Department and the Purchasing Department are considered controllable by the divisions. Corporate administrative costs are not considered controllable by the divisions. The revenues, cost of goods sold, and operating expenses for the two divisions are as follows: Consumer Commercial Revenues $5,900,000 $4,950,000 Cost of goods sold 2,475,000 3,304,000 1,180,000 Operating expenses 1,237,500 Prepare the divisional income statements for the two divisions. Round your interim calculations to three decimal places, if required. GRAEL TECHNOLOGY Divisional Income Statements For the Year Ended December 31, 2017 Consumer Commercial Division Division Revenues 5,900,000 4,950,000 Cost of goods sold -3,304,000 -2,475,000 Gross profit 2,596,000 2,475,000 Operating expenses -1,180,000 -1,237,500 1,416,000 1,237,500 Income from operations before service department allocations Less service department cost allocations: : Tech support department 210,000 27,000 126,000 40,500 Purchasing department 1,179,000 x 1,071,000 x Income from operations 2,595,000 2,308,500 X Feedback Check My Work Subtract the service department charges for a division from that division's income from operations before such charges to determine income from operations
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