Question
Divisional Income Statements with Service Department Charges Grael Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing.
Divisional Income Statements with Service Department Charges Grael 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: Tech Support Department Purchasing Department $735,300 253,500 Other corporate administrative expenses Total corporate expense 425,000 $1,413,800 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: Purchasing Consumer Division Commercial Division Total Tech Support 350 computers 220 5,900 purchase orders 11,000 570 computers 16,900 purchase orders 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: Consumer Commercial Revenues $6,350,600 $5,200,900 Cost of goods sold 3,528,100 2,626,200 Operating expenses 1,245,700 1,300,100 Prepare the divisional income statements for the two divisions. Do not round your interim calculations. GRAEL TECHNOLOGY Divisional Income Statements For the Year Ended December 31, 20Y7 Revenues Consumer Division Commercial Division Cost of goods sold Gross profit Operating expenses Income from operations before service department charges Less service department charges: Tech Support department Purchasing department Income from operations 88
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