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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 $31,20$Y$7,$ are as follows:

Line Item Description Amount

Tech Services Department $$991,200$

Purchasing Department $258,000$

Other corporate administrative expenses $537,000$

Total expense $$1,786,200$

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 $360$ computers $6,000$ purchase orders

Commercial Division $23011,200$

Total $590$ computers $17,200$ 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 $$8,171,100$ $$6,424,600$

Cost of goods sold $4,539,5003,244,100$

Operating expenses $1,602,8001,606,000$

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 $31,20$Y$7$

Line Item Description Consumer

Division Commercial

Division

Revenues

$Revenues

$8,171,100$

$Revenues

$6,424,600$

Cost of goods sold

Cost of goods sold

$4,539,500$

Cost of goods sold

$3,244,100$

Gross profit

$Gross profit

$3,631,600$

$Gross profit

$3,180,500$

Operating expenses

Operating expenses

$1,602,800$

Operating expenses

$1,606,000$

Operating income before support department allocations $Operating income before support department allocations

$2,028,800$

$Operating income before support department allocations

$1,574,500$

Support department allocations:

Tech service department

$Tech service department

$Tech service department

Purchasing department

Purchasing department

Purchasing department

Total support department allocations $Total support department allocations

$Total support department allocations

Operating income

$Operating income

$Operating income