Income Statement EA5. LO 9.4 Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales). After calculating the operating income in dollars and operating income in percentage, analyze the following financial information to determine costs that may need further investigation. (Hint: It may be helpful to perform a vertical analysis.) MARLEY'S MANUFACTURING Month Ending August 31, 2018 Dept A Sales $22,000 Cost of goods sold 10,560 Gross profit $11.440 Utility expenses 1.000 Wages expense 5.500 Costs allocated from corporate 2.200 Total expenses $ 8.700 Operating incomelloss) ? Operating income (loss) % 7 Solution Marley's Manufacturing Income Statement Month Ended Aug. 31, 2018 Dept A Dept B Sales $22.000 $51.000 Cost of Goods Sold $10,560[]26,520 Gross Profit $11.440 $24.480 Utility Expenses $1,000 $3,200 Wages Expense $5,500 10.2001 Costs Allocated from Corporate S2.200]$15.000 Total Expenses $8,700 $28,400 Dept B $51,000 26,520 $24.480 3.200 10,200 15,000 $28,400 ? 7 Operating Income (loss) Operating Income (loss) % Department B had an operating which was driven by a cost of goods sold (mainly transfers from department A). Department A also has a wage percent of sales. Department B receives a percent of allocated costs. These factors impact the financial performance of department B