Divisional income statements with support department allocations

Horton Technology has two divisions, Consumer and Commercial, and two corporate support departments, Tech Services and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows:

Line Item Description	Amount
Tech Services Department	$889,000
Purchasing Department	228,000
Other corporate administrative expenses	480,000
Total expense	$1,597,000

The other corporate administrative expenses include officers salaries and other expenses required by the corporation. The Tech Services Department allocates costs to the divisions based on the number of computers in the department, and the Purchasing Department allocates costs to the divisions based on the number of purchase orders for each department. The services used by the two divisions are as follows:

Line Item Description	Tech Services	Purchasing
Consumer Division	430 computers	5,300 purchase orders
Commercial Division	270	9,900
Total	700 computers	15,200 purchase orders

The support department allocations of the Tech Services 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:

Line Item Description	Consumer	Commercial
Revenues	$7,357,500	$5,694,600
Cost of goods sold	4,087,500	2,875,500
Operating expenses	1,443,200	1,423,500

Prepare the divisional income statements for the two divisions. Do not round your interim calculations.

Horton Technology Divisional Income Statements For the Year Ended December 31, 20Y7

Line Item Description	Consumer Division	Commercial Division
Gross profitCashOperating expensesOperating incomeRevenuesRevenues	$Revenues	$Revenues
CashCost of goods soldGross profitOperating incomeTech service departmentCost of goods sold	Cost of goods sold	Cost of goods sold
CashGross profitLoss from operationsOperating expensesRevenuesGross profit	$Gross profit	$Gross profit
CashLoss from operationsOperating expensesOperating incomePurchasing departmentOperating expenses	Operating expenses	Operating expenses
Operating income before support department allocations	$Operating income before support department allocations	$Operating income before support department allocations
Support department allocations:
CashCost of goods soldOperating expensesOperating incomeTech service departmentTech service department	$Tech service department	$Tech service department
CashGross profitOperating expensesOperating incomePurchasing departmentPurchasing department	Purchasing department	Purchasing department
Total support department allocations	$Total support department allocations	$Total support department allocations
Gross profitOperating incomeOperating income before service department chargesLoss from operationsOperating income	$Operating income	$Operating income