Help with the income statements thank you

Ch 24 problem Printem Mastery Problem: Evaluating Decentralized Operations BOR CPAS, Inc. BOR CPAs, Inc. is a closely held corporation owned by three stockholders who used the initials of their lest names to form the corporation's name: Cyrus Bailey, John Ogden, and Samuel Rogers. The firm's Certified Public Accountants (CPAs) perform audits of both public companies and privately owned companies. BOR'S CPAs also provide tax services to both Individuals and businesses. The corporation is divided into two profit centers: the Audit Division and the Tax Division. Each division is composed of two cost centers. The Audit Division is composed of two cost-center departments: Public Company Audits and Private Company Audits. The Tax Division is Composed of tao cest-center departments alsa: Individual Tax and Business Tax. BOR, a decentralized organization, is interested in evaluating the performance of the two dinistars. The stackhalders are resparcible for derding on Investment in the two divisions. Cyrus Ballay is in charge of the performance evaluation, and tums to you for assistance. Mr. Beiley is only interested in evaluating operations at the profit center (division) level, and not at the cost center (depertirent) level. Mr. Bailey is considering temporarily using some of the staff from the Tax Division to assist the Audit Division during the upcoming busy sucit season, and would like to evaluate the effect of this on net income. The Tex Division is estimated to have 600 hours of excess capacity. The unit for determining sales revenue in both divisions is the 'engagement, which means the total agreed-upon work for a given client in either audit or tax for a given year. The company charges on average a fee of $75,000 per audit engagement, and $15,750 per tax engagement. The company has its own Payroll Office, which provides payroll services to both divisors and will allocate its total exacnses to the twa divisions as support department allocations. s100 $60 The following chart shows some basic cata for the company: Hourly market rate for statt (the price the company would have to pay from an outside contractor for salf services Average hourly cast rate for staff (the average price the company pays to its staff Number of paychecks issued by Audit Division Number of paychecks issued by Tax Division Total expense for Payroll Office Amount of assets invested in Audit Division by BOR CPAS, Inc. Amount of assets invested in Tax Division by BOR CPAS, Inc. 110 3411 $31,500 $10,000,000 $5,000,000 Payroll Mr. Bailey would like you to start by analyzing the Payrall Office expenses, and allocating the total expenses to each division. He has decided to use the number of payroll checlcs as the activity base for the allocation. All in the following blanks, allocating the total expense for the Payrall Office ta cach of the two divisions. Payroll Charge Rate $ 70 per payroll check Support Department Allocations Division Audit Division f 7,700 Tax Division $ 23,800 No Transfer Mr. Bailey has prepared the following divisional income statement for you to review, assuming no transfer of excess capacity hours occurs. He has also included the total amounts for BOR CPAS, Inc. in the rightmost column. Complete the following Divisional Income Statements with your data from the Peyroll BOR CPAS, Inc. Divisional Income Statements For the Year Ended December 31, 2018 Audit Division Tax Division Total Company Fees camed: $900,000 $900,non $708,750 700,750 Audit toes (12 engagements) Tex fees (45 engagerners) Transfer pricing fees Expenses D Variable: Audit hours provided by Audit Division (226,000) Tax hours provided by Tax Division Excess capacity hours paid to salaried staff Audit hours provided by Tex Division (216,000) (283,500) (48,000) (283,500) (48,000) 0 (65,500) $311,750 0 Fixed expenses (115,500) 150.000) $631,000 $915,750 Operating income before support department allocations Support department allocations for payroll Operating income $ Ford Check My Work Induce your answers from the Payroll on the appropriate line of the Divisional Income Statements. Market Transfer Price Mr. Bailey asks that you prepare Divisional Income Stalernents showing what 20Y6 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a market transfer price. The divisional manegers tell you that, with the excess capadty of the Tax Division or 809 hours, the Audit Division can perform 4 more audits during the year, and the Tax Division would charge the Audit Division the market rate of $100 per hour for the additional hours required, selling all its excess capacity to the Audit Division. The Tax Division would still be resporsible for paying the salaries of their employees. Complete the following Divisional Thcome Statements. If there is no amount or an amount is zero, enter "o Market Transfer Price Mr. Bailey asks that you prepare Divisional Income Statements showing what 20Y& results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a market transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of 800 hours, the Audit Division can perform 4 more audits during the year, and the Tax Division would charge the Audit Division the market rate of $ion per hour for the additional hours required, selling all its excess capadty to the Audit Division. The Tax Division would still be resporsible for paying the salaries of their employees Complete the following Divisional Income Statements. If there is no amount or an amount is zero, mter om BOR CPAs, Inc. Divisional Income Statements For the Year Ended December 31, 2048 Audit Division Tax Division Total Company Fees eamed: Audit fees (16 engagements) $1.200,000 $1,200,000 Tax fees (45 engagements) $704,750 709,750 Transfer-pricing fees Expenses: Variable: Audit hours pravided by Audit Division (216,000 (216,000) Tax hours provided by Tax Division (283,500) (783,500) ) Excess capacity hours paid to salaried staff Audit hours provided by Tax Division Fixed expenses (50,000) (65,500) (115,500) Operating income before support department allocations # Support department allocations for payroll Operating Income $ # Facile Check My Work Compute the price cherged by the Tax Division to the Audit Division, and both the transfer pricing fees and cost to the Tax Division of the sale or its excess hours. Be sure to revise the Total Company, Operating wicone bedre swpoort departoient allocations, and Qnevaring income tatals using your ravised amounts. Negotiated Transfer Price Negotiated Transfer Price Mr. Balley asks that you prepare Divisional Income Statements showing what 2018 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a negotiated transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of 900 hours, the Audit Division can perform 4 ore audits during the year, and the Audit Division would agree to a negatiated rate of $90 per hour to be paid to the Tax Division for the adc donal hours required, with the Tax Division selling all its excess capacity to the Audit Division. The Tax Division would still be responsible for paying the salaries of their erroloyees Complete the following Divisional Income Statements. If there is no amount or an amount is zero, entero". BOR CPAS, Inc. Divisional Income Statements For the Year Ended December 31, 2018 Audit Division Tax Division Total Company Fars samed: $1,200.000 $1,200,000 Audit rees (15 engagements) Tax fees (45 engagements) $709,750 209.750 Transfer pricing fres Expenses Variable: Audit hours provided by Audit Division (216,000) (216,000) (283,500) Tax hours provided by Tax Division (283,500) Excess capacity hours paid to salaried star Audit hours provided by Tex Division Fixed expenses (50.000) (65.500) (115.500) Operating income before support department allocations $ $ $ $ Support department locations for payroll Operating Income $ $ $ Foulus Check We Work Compute the price charged by the Tax Division to the Audit Division, and both the transfer pricing fees and cost to the Tax Division of the sale of its excess hours. Be sure to revise the Total Company, Operating income before swport department allocations, and Operating income totals using your revised amounts. Cost Transfer Price Mr. Bailey asks that you prepare Divisional Income Statements showing what 2048 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a cost transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of a hours, the Audit Division can pertam 4 more audits during the year, and the Audit Division would pay the Tax Division's intemal hourly rate of $60 per hour for the additional hours required, with the Tax Division selling all its excess capacity to the Audit Division. The Tax Division would still be responsible for paying the salaries of their employees. Complete the following Divisional Income Statements. If there is no amount or an amount is zern, cnter "a". BOR CPAS, Inc. Divisional Income Statements For the Year Ended December 31, 2018 Audit Division Tax Division Total Company Fees eamed Audit fees (16 engagements) $1,200,000 $1,200,000 Tax feas (45 engagements) $704,750 704,750 Transfer pricing fees Expenses: Variable: Audit haurs provided by Audit Division (216,000) (216,000) Tax hours provided by Thx Division (783,500) 1283,500) Excess capacity hours paid to salaried staff Audit hours provided by Tax Division Fixed expenses (50.000) (65,500) (115.500) Operating income before support department allocations $ Support department a locations for payroll Operating Income $ $ Fencia Chuck Work Compute the price charged by the Tax Division to the Audit Division, and both the transfer-pricing fees and cost to the Tex Division of the sale of its excess hours. Be sure to revise the Total Company, Operating income before support department allucetions, and Operating income totals using your revised amounts. Analysis You are now able to put together all the information you've collected and analyze the date. In the following table, "ROI stands for 'Return on investment." Complete the following tables using the information from the other requirements and selection lists provided. Audit Division Profit Margin X Investment Turnover = ROI No Transfer Market Price Negotiated Price X Cast Price - Tax Division Profit Margin Investment Turnover = ROI X No Transfer Market Price Negotiated Price X Cost Price BOR CPAs, Inc. Profit Margin x Investment Turnover ROI No Transfer Market Price x Negotiated Price Cast Price Foodcock The Work Review the definitions of profit margin, Investment turnover, and return on Investment, and use the data you've computed in other requirements to compute the ratios. Ch 24 problem Printem Mastery Problem: Evaluating Decentralized Operations BOR CPAS, Inc. BOR CPAs, Inc. is a closely held corporation owned by three stockholders who used the initials of their lest names to form the corporation's name: Cyrus Bailey, John Ogden, and Samuel Rogers. The firm's Certified Public Accountants (CPAs) perform audits of both public companies and privately owned companies. BOR'S CPAs also provide tax services to both Individuals and businesses. The corporation is divided into two profit centers: the Audit Division and the Tax Division. Each division is composed of two cost centers. The Audit Division is composed of two cost-center departments: Public Company Audits and Private Company Audits. The Tax Division is Composed of tao cest-center departments alsa: Individual Tax and Business Tax. BOR, a decentralized organization, is interested in evaluating the performance of the two dinistars. The stackhalders are resparcible for derding on Investment in the two divisions. Cyrus Ballay is in charge of the performance evaluation, and tums to you for assistance. Mr. Beiley is only interested in evaluating operations at the profit center (division) level, and not at the cost center (depertirent) level. Mr. Bailey is considering temporarily using some of the staff from the Tax Division to assist the Audit Division during the upcoming busy sucit season, and would like to evaluate the effect of this on net income. The Tex Division is estimated to have 600 hours of excess capacity. The unit for determining sales revenue in both divisions is the 'engagement, which means the total agreed-upon work for a given client in either audit or tax for a given year. The company charges on average a fee of $75,000 per audit engagement, and $15,750 per tax engagement. The company has its own Payroll Office, which provides payroll services to both divisors and will allocate its total exacnses to the twa divisions as support department allocations. s100 $60 The following chart shows some basic cata for the company: Hourly market rate for statt (the price the company would have to pay from an outside contractor for salf services Average hourly cast rate for staff (the average price the company pays to its staff Number of paychecks issued by Audit Division Number of paychecks issued by Tax Division Total expense for Payroll Office Amount of assets invested in Audit Division by BOR CPAS, Inc. Amount of assets invested in Tax Division by BOR CPAS, Inc. 110 3411 $31,500 $10,000,000 $5,000,000 Payroll Mr. Bailey would like you to start by analyzing the Payrall Office expenses, and allocating the total expenses to each division. He has decided to use the number of payroll checlcs as the activity base for the allocation. All in the following blanks, allocating the total expense for the Payrall Office ta cach of the two divisions. Payroll Charge Rate $ 70 per payroll check Support Department Allocations Division Audit Division f 7,700 Tax Division $ 23,800 No Transfer Mr. Bailey has prepared the following divisional income statement for you to review, assuming no transfer of excess capacity hours occurs. He has also included the total amounts for BOR CPAS, Inc. in the rightmost column. Complete the following Divisional Income Statements with your data from the Peyroll BOR CPAS, Inc. Divisional Income Statements For the Year Ended December 31, 2018 Audit Division Tax Division Total Company Fees camed: $900,000 $900,non $708,750 700,750 Audit toes (12 engagements) Tex fees (45 engagerners) Transfer pricing fees Expenses D Variable: Audit hours provided by Audit Division (226,000) Tax hours provided by Tax Division Excess capacity hours paid to salaried staff Audit hours provided by Tex Division (216,000) (283,500) (48,000) (283,500) (48,000) 0 (65,500) $311,750 0 Fixed expenses (115,500) 150.000) $631,000 $915,750 Operating income before support department allocations Support department allocations for payroll Operating income $ Ford Check My Work Induce your answers from the Payroll on the appropriate line of the Divisional Income Statements. Market Transfer Price Mr. Bailey asks that you prepare Divisional Income Stalernents showing what 20Y6 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a market transfer price. The divisional manegers tell you that, with the excess capadty of the Tax Division or 809 hours, the Audit Division can perform 4 more audits during the year, and the Tax Division would charge the Audit Division the market rate of $100 per hour for the additional hours required, selling all its excess capacity to the Audit Division. The Tax Division would still be resporsible for paying the salaries of their employees. Complete the following Divisional Thcome Statements. If there is no amount or an amount is zero, enter "o Market Transfer Price Mr. Bailey asks that you prepare Divisional Income Statements showing what 20Y& results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a market transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of 800 hours, the Audit Division can perform 4 more audits during the year, and the Tax Division would charge the Audit Division the market rate of $ion per hour for the additional hours required, selling all its excess capadty to the Audit Division. The Tax Division would still be resporsible for paying the salaries of their employees Complete the following Divisional Income Statements. If there is no amount or an amount is zero, mter om BOR CPAs, Inc. Divisional Income Statements For the Year Ended December 31, 2048 Audit Division Tax Division Total Company Fees eamed: Audit fees (16 engagements) $1.200,000 $1,200,000 Tax fees (45 engagements) $704,750 709,750 Transfer-pricing fees Expenses: Variable: Audit hours pravided by Audit Division (216,000 (216,000) Tax hours provided by Tax Division (283,500) (783,500) ) Excess capacity hours paid to salaried staff Audit hours provided by Tax Division Fixed expenses (50,000) (65,500) (115,500) Operating income before support department allocations # Support department allocations for payroll Operating Income $ # Facile Check My Work Compute the price cherged by the Tax Division to the Audit Division, and both the transfer pricing fees and cost to the Tax Division of the sale or its excess hours. Be sure to revise the Total Company, Operating wicone bedre swpoort departoient allocations, and Qnevaring income tatals using your ravised amounts. Negotiated Transfer Price Negotiated Transfer Price Mr. Balley asks that you prepare Divisional Income Statements showing what 2018 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a negotiated transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of 900 hours, the Audit Division can perform 4 ore audits during the year, and the Audit Division would agree to a negatiated rate of $90 per hour to be paid to the Tax Division for the adc donal hours required, with the Tax Division selling all its excess capacity to the Audit Division. The Tax Division would still be responsible for paying the salaries of their erroloyees Complete the following Divisional Income Statements. If there is no amount or an amount is zero, entero". BOR CPAS, Inc. Divisional Income Statements For the Year Ended December 31, 2018 Audit Division Tax Division Total Company Fars samed: $1,200.000 $1,200,000 Audit rees (15 engagements) Tax fees (45 engagements) $709,750 209.750 Transfer pricing fres Expenses Variable: Audit hours provided by Audit Division (216,000) (216,000) (283,500) Tax hours provided by Tax Division (283,500) Excess capacity hours paid to salaried star Audit hours provided by Tex Division Fixed expenses (50.000) (65.500) (115.500) Operating income before support department allocations $ $ $ $ Support department locations for payroll Operating Income $ $ $ Foulus Check We Work Compute the price charged by the Tax Division to the Audit Division, and both the transfer pricing fees and cost to the Tax Division of the sale of its excess hours. Be sure to revise the Total Company, Operating income before swport department allocations, and Operating income totals using your revised amounts. Cost Transfer Price Mr. Bailey asks that you prepare Divisional Income Statements showing what 2048 results would have been had the Audit Division purchased all the excess capacity of the Tax Division, using a cost transfer price. The divisional managers tell you that, with the excess capacity of the Tax Division of a hours, the Audit Division can pertam 4 more audits during the year, and the Audit Division would pay the Tax Division's intemal hourly rate of $60 per hour for the additional hours required, with the Tax Division selling all its excess capacity to the Audit Division. The Tax Division would still be responsible for paying the salaries of their employees. Complete the following Divisional Income Statements. If there is no amount or an amount is zern, cnter "a". BOR CPAS, Inc. Divisional Income Statements For the Year Ended December 31, 2018 Audit Division Tax Division Total Company Fees eamed Audit fees (16 engagements) $1,200,000 $1,200,000 Tax feas (45 engagements) $704,750 704,750 Transfer pricing fees Expenses: Variable: Audit haurs provided by Audit Division (216,000) (216,000) Tax hours provided by Thx Division (783,500) 1283,500) Excess capacity hours paid to salaried staff Audit hours provided by Tax Division Fixed expenses (50.000) (65,500) (115.500) Operating income before support department allocations $ Support department a locations for payroll Operating Income $ $ Fencia Chuck Work Compute the price charged by the Tax Division to the Audit Division, and both the transfer-pricing fees and cost to the Tex Division of the sale of its excess hours. Be sure to revise the Total Company, Operating income before support department allucetions, and Operating income totals using your revised amounts. Analysis You are now able to put together all the information you've collected and analyze the date. In the following table, "ROI stands for 'Return on investment." Complete the following tables using the information from the other requirements and selection lists provided. Audit Division Profit Margin X Investment Turnover = ROI No Transfer Market Price Negotiated Price X Cast Price - Tax Division Profit Margin Investment Turnover = ROI X No Transfer Market Price Negotiated Price X Cost Price BOR CPAs, Inc. Profit Margin x Investment Turnover ROI No Transfer Market Price x Negotiated Price Cast Price Foodcock The Work Review the definitions of profit margin, Investment turnover, and return on Investment, and use the data you've computed in other requirements to compute the ratios