Question
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
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 | $986,100 |
Purchasing Department | 415,000 |
Other corporate administrative expenses | 602,000 |
Total expense | $2,003,100 |
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 | 350 computers | 5,800 purchase orders |
Commercial Division | 220 | 10,800 |
Total | 570 computers | 16,600 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 | $8,826,300 | $7,539,400 |
Cost of goods sold | 4,903,500 | 3,807,000 |
Operating expenses | 1,731,300 | 1,884,700 |
Prepare the divisional income statements for the two divisions. Do not round your interim calculations.
Line Item Description | Consumer Division | Commercial Division |
---|---|---|
Gross profit, Cash, Operating expenses, Operating income, Revenues | $ | $ |
Cash, Cost of goods sold, Gross profit, Operating income, Tech service department | ||
CashGross profitLoss from operationsOperating expensesRevenues | $ | $ |
Cash, Loss from operations, Operating expenses, Operating income, Purchasing department | ||
Operating income before support department allocations | $Operating income before support department allocations | $Operating income before support department allocations |
Support department allocations: | ||
Cash, Cost of goods sold, Operating expenses, Operating income, Tech service department | $ | $ |
Cash, Gross profit, Operating expenses, Operating income, Purchasing department | ||
Total support department allocations | $Total support department allocations | $Total support department allocations |
Gross profit, Operating income, Operating income before service department charges, Loss from operations | $ | $ |
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