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Fields Infiniti had the following data for the year's operations: (Click the icon to view the data.) The president of the dealership has long regarded
Fields Infiniti had the following data for the year's operations: (Click the icon to view the data.) The president of the dealership has long regarded the markup on material and labor for the parts and service activity as the amount that is supposed to cover all parts and service overhead plus some general overhead of the dealership. In other words, the parts and service department is viewed as a cost-recovery operation, while the sales of vehicles is viewed as the income-producing activity. Read the requirements. - Data table Parts and Service Vehicles Sales Sales of vehicles $ 1,800,000 Cost of sales Parts and service materials Parts and service labor Sales commissions Subtotal of costs Sales of parts and service Cost of vehicle sales Parts and service materials Parts and service labor Parts and service overhead General dealership overhead Advertising of vehicles Sales commissions, vehicles Sales salaries, vehicles 1,000,000 1,080,000 400,000 400,000 100,000 160,000 130,000 36,000 92,000 Markup on variable material and labor* Parts and service overhead Advertising Sales salaries General dealership overhead Net income * Roughly equivalent to contribution margin Print Done Requirements 1. Prepare a departmentalized operating statement that harmonizes with the views of the president. 2. Prepare an alternative operating statement that would reflect a different view of the dealership operations. Assume that $15,000 and $85,000 of the $160,000 general overhead can be allocated with confidence to the parts and service department and to sales of vehicles, respectively. The remaining $60,000 cannot be allocated except in some highly arbitrary manner. 3. Comment on the relative merits of numbers 1 and 2. Print Done
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